Correlation Between Lantronix and AudioCodes

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

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

Diversification Opportunities for Lantronix and AudioCodes

0.61

Correlation Coefficient

Lantronix  AudioCodes

Poor diversification

The 3 months correlation between Lantronix and AudioCodes is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes 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 AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Lantronix i.e., Lantronix and AudioCodes go up and down completely randomly.

Pair Corralation between Lantronix and AudioCodes

Given the investment horizon of 90 days Lantronix is expected to generate 1.5 times less return on investment than AudioCodes. In addition to that, Lantronix is 2.43 times more volatile than AudioCodes. It trades about 0.08 of its total potential returns per unit of risk. AudioCodes is currently generating about 0.27 per unit of volatility. If you would invest  778.00  in AudioCodes on October 7, 2024 and sell it today you would earn a total of  221.00  from holding AudioCodes or generate 28.41% return on investment over 90 days.

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

Lantronix  vs.  AudioCodes

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.

AudioCodes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AudioCodes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, AudioCodes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lantronix and AudioCodes

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

The idea behind Lantronix and AudioCodes 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.