Correlation Between LightPath Technologies and Lantronix

Can any of the company-specific risk be diversified away by investing in both LightPath Technologies and Lantronix at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LightPath Technologies and Lantronix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LightPath Technologies and Lantronix, you can compare the effects of market volatilities on LightPath Technologies and Lantronix and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LightPath Technologies with a short position of Lantronix. Check out your portfolio center. Please also check ongoing floating volatility patterns of LightPath Technologies and Lantronix.

Diversification Opportunities for LightPath Technologies and Lantronix

0.7

Correlation Coefficient

LightPath Technologies  Lantronix

Poor diversification

The 3 months correlation between LightPath and Lantronix is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LightPath Technologies and Lantronix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lantronix and LightPath Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LightPath Technologies are associated (or correlated) with Lantronix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lantronix has no effect on the direction of LightPath Technologies i.e., LightPath Technologies and Lantronix go up and down completely randomly.

Pair Corralation between LightPath Technologies and Lantronix

Given the investment horizon of 90 days LightPath Technologies is expected to generate 1.32 times more return on investment than Lantronix. However, LightPath Technologies is 1.32 times more volatile than Lantronix. It trades about 0.09 of its potential returns per unit of risk. Lantronix is currently generating about -0.03 per unit of risk. If you would invest  183.00  in LightPath Technologies on December 1, 2024 and sell it today you would earn a total of  45.00  from holding LightPath Technologies or generate 24.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LightPath Technologies  vs.  Lantronix

LightPath Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LightPath Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, LightPath Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Lantronix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lantronix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LightPath Technologies and Lantronix

The main advantage of trading using opposite LightPath Technologies and Lantronix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LightPath Technologies position performs unexpectedly, Lantronix can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lantronix will offset losses from the drop in Lantronix's long position.

The idea behind LightPath Technologies and Lantronix pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.