Correlation Between Lantronix and BK Technologies

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

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

Diversification Opportunities for Lantronix and BK Technologies

0.61

Correlation Coefficient

Lantronix  BK Technologies

Poor diversification

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

Pair Corralation between Lantronix and BK Technologies

Given the investment horizon of 90 days Lantronix is expected to under-perform the BK Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Lantronix is 1.05 times less risky than BK Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The BK Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,491  in BK Technologies on December 29, 2024 and sell it today you would earn a total of  109.00  from holding BK Technologies or generate 3.12% return on investment over 90 days.

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

Lantronix  vs.  BK Technologies

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 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 current disturbance may also be a sign of long term up-swing for the company investors.

BK Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BK Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lantronix and BK Technologies

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

The idea behind Lantronix and BK Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.