Correlation Between LightPath Technologies and OSI Systems

Can any of the company-specific risk be diversified away by investing in both LightPath Technologies and OSI Systems 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 OSI Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LightPath Technologies and OSI Systems, you can compare the effects of market volatilities on LightPath Technologies and OSI Systems 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 OSI Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of LightPath Technologies and OSI Systems.

Diversification Opportunities for LightPath Technologies and OSI Systems

-0.37

Correlation Coefficient

LightPath Technologies  OSI Systems

Very good diversification

The 3 months correlation between LightPath and OSI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding LightPath Technologies and OSI Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSI Systems 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 OSI Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSI Systems has no effect on the direction of LightPath Technologies i.e., LightPath Technologies and OSI Systems go up and down completely randomly.

Pair Corralation between LightPath Technologies and OSI Systems

Given the investment horizon of 90 days LightPath Technologies is expected to under-perform the OSI Systems. In addition to that, LightPath Technologies is 1.36 times more volatile than OSI Systems. It trades about -0.13 of its total potential returns per unit of risk. OSI Systems is currently generating about -0.01 per unit of volatility. If you would invest  20,231  in OSI Systems on December 28, 2024 and sell it today you would lose (320.00) from holding OSI Systems or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

LightPath Technologies  vs.  OSI Systems

LightPath Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days LightPath Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

OSI Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LightPath Technologies and OSI Systems

The main advantage of trading using opposite LightPath Technologies and OSI Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LightPath Technologies position performs unexpectedly, OSI Systems 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 OSI Systems will offset losses from the drop in OSI Systems' long position.

The idea behind LightPath Technologies and OSI Systems 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.