Correlation Between Lantronix and Universal Security

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

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

Diversification Opportunities for Lantronix and Universal Security

-0.48

Correlation Coefficient

Lantronix  Universal Security

Very good diversification

The 3 months correlation between Lantronix and Universal is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and Universal Security Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Security 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 Universal Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Security has no effect on the direction of Lantronix i.e., Lantronix and Universal Security go up and down completely randomly.

Pair Corralation between Lantronix and Universal Security

Given the investment horizon of 90 days Lantronix is expected to generate 3.69 times less return on investment than Universal Security. But when comparing it to its historical volatility, Lantronix is 1.48 times less risky than Universal Security. It trades about 0.07 of its potential returns per unit of risk. Universal Security Instruments is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  126.00  in Universal Security Instruments on October 8, 2024 and sell it today you would earn a total of  106.00  from holding Universal Security Instruments or generate 84.13% return on investment over 90 days.

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

Lantronix  vs.  Universal Security Instruments

Lantronix

Risk-Adjusted Performance

5 of 100

Weak

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.

Universal Security

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Security Instruments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Universal Security unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lantronix and Universal Security

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

The idea behind Lantronix and Universal Security Instruments 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.