Correlation Between Lantronix and LightPath Technologies

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

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

Diversification Opportunities for Lantronix and LightPath Technologies

-0.29

Correlation Coefficient

Lantronix  LightPath Technologies

Very good diversification

The 3 months correlation between Lantronix and LightPath is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath 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 LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of Lantronix i.e., Lantronix and LightPath Technologies go up and down completely randomly.

Pair Corralation between Lantronix and LightPath Technologies

Given the investment horizon of 90 days Lantronix is expected to under-perform the LightPath Technologies. In addition to that, Lantronix is 1.26 times more volatile than LightPath Technologies. It trades about -0.01 of its total potential returns per unit of risk. LightPath Technologies is currently generating about 0.17 per unit of volatility. If you would invest  124.00  in LightPath Technologies on September 4, 2024 and sell it today you would earn a total of  62.00  from holding LightPath Technologies or generate 50.0% return on investment over 90 days.

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

Lantronix  vs.  LightPath Technologies

Lantronix

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Lantronix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

LightPath Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LightPath Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, LightPath Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lantronix and LightPath Technologies

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

The idea behind Lantronix and LightPath 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.