Correlation Between Lantronix and Ribbon Communications

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

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

Diversification Opportunities for Lantronix and Ribbon Communications

-0.32

Correlation Coefficient

Lantronix  Ribbon Communications

Very good diversification

The 3 months correlation between Lantronix and Ribbon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications 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 Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of Lantronix i.e., Lantronix and Ribbon Communications go up and down completely randomly.

Pair Corralation between Lantronix and Ribbon Communications

Given the investment horizon of 90 days Lantronix is expected to under-perform the Ribbon Communications. In addition to that, Lantronix is 1.37 times more volatile than Ribbon Communications. It trades about -0.09 of its total potential returns per unit of risk. Ribbon Communications is currently generating about 0.0 per unit of volatility. If you would invest  417.00  in Ribbon Communications on December 22, 2024 and sell it today you would lose (16.00) from holding Ribbon Communications or give up 3.84% of portfolio value over 90 days.

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

Lantronix  vs.  Ribbon Communications

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.

Ribbon Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ribbon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Ribbon Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lantronix and Ribbon Communications

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

The idea behind Lantronix and Ribbon Communications 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.