Correlation Between Lantronix and ADTRAN

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

By analyzing existing cross correlation between Lantronix and ADTRAN Inc, you can compare the effects of market volatilities on Lantronix and ADTRAN 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 Lantronix with a short position of ADTRAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lantronix and ADTRAN.

Diversification Opportunities for Lantronix and ADTRAN

-0.55

Correlation Coefficient

Lantronix  ADTRAN

Excellent diversification

The 3 months correlation between Lantronix and ADTRAN is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Lantronix 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 Lantronix are associated (or correlated) with ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Lantronix i.e., Lantronix and ADTRAN go up and down completely randomly.

Pair Corralation between Lantronix and ADTRAN

Given the investment horizon of 90 days Lantronix is expected to generate 2.21 times less return on investment than ADTRAN. In addition to that, Lantronix is 1.45 times more volatile than ADTRAN Inc. It trades about 0.08 of its total potential returns per unit of risk. ADTRAN Inc is currently generating about 0.24 per unit of volatility. If you would invest  633.00  in ADTRAN Inc on October 7, 2024 and sell it today you would earn a total of  271.00  from holding ADTRAN Inc or generate 42.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lantronix  vs.  ADTRAN Inc

Lantronix

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lantronix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Lantronix showed solid returns over the last few months and may actually be approaching a breakup point.

ADTRAN Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ADTRAN Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ADTRAN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lantronix and ADTRAN

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

The idea behind Lantronix and ADTRAN Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.