Correlation Between Lantronix and Franklin Wireless

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

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

Diversification Opportunities for Lantronix and Franklin Wireless

0.26

Correlation Coefficient

Lantronix  Franklin Wireless

Modest diversification

The 3 months correlation between Lantronix and Franklin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Lantronix i.e., Lantronix and Franklin Wireless go up and down completely randomly.

Pair Corralation between Lantronix and Franklin Wireless

Given the investment horizon of 90 days Lantronix is expected to generate 1.27 times more return on investment than Franklin Wireless. However, Lantronix is 1.27 times more volatile than Franklin Wireless Corp. It trades about 0.34 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.22 per unit of risk. If you would invest  340.00  in Lantronix on October 8, 2024 and sell it today you would earn a total of  83.00  from holding Lantronix or generate 24.41% return on investment over 90 days.

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

Lantronix  vs.  Franklin Wireless Corp

Lantronix

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lantronix are ranked lower than 5 (%) 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.

Franklin Wireless Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Wireless Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Franklin Wireless disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lantronix and Franklin Wireless

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

The idea behind Lantronix and Franklin Wireless Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.