Correlation Between Lantronix and Telefonaktiebolaget

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

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

Diversification Opportunities for Lantronix and Telefonaktiebolaget

0.01

Correlation Coefficient

Lantronix  Telefonaktiebolaget

Significant diversification

The 3 months correlation between Lantronix and Telefonaktiebolaget is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Lantronix i.e., Lantronix and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Lantronix and Telefonaktiebolaget

Given the investment horizon of 90 days Lantronix is expected to generate 2.33 times more return on investment than Telefonaktiebolaget. However, Lantronix is 2.33 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.05 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.08 per unit of risk. If you would invest  382.00  in Lantronix on October 6, 2024 and sell it today you would earn a total of  25.00  from holding Lantronix or generate 6.54% return on investment over 90 days.

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

Lantronix  vs.  Telefonaktiebolaget LM Ericsso

Lantronix

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lantronix are ranked lower than 3 (%) 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.

Telefonaktiebolaget

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, Telefonaktiebolaget may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lantronix and Telefonaktiebolaget

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

The idea behind Lantronix and Telefonaktiebolaget LM Ericsson 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.