Correlation Between Lantronix and Viavi Solutions

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

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

Diversification Opportunities for Lantronix and Viavi Solutions

-0.37

Correlation Coefficient

Lantronix  Viavi Solutions

Very good diversification

The 3 months correlation between Lantronix and Viavi is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lantronix and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Lantronix i.e., Lantronix and Viavi Solutions go up and down completely randomly.

Pair Corralation between Lantronix and Viavi Solutions

Given the investment horizon of 90 days Lantronix is expected to under-perform the Viavi Solutions. In addition to that, Lantronix is 1.49 times more volatile than Viavi Solutions. It trades about -0.14 of its total potential returns per unit of risk. Viavi Solutions is currently generating about 0.07 per unit of volatility. If you would invest  1,008  in Viavi Solutions on December 29, 2024 and sell it today you would earn a total of  118.00  from holding Viavi Solutions or generate 11.71% return on investment over 90 days.

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

Lantronix  vs.  Viavi Solutions

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.

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lantronix and Viavi Solutions

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

The idea behind Lantronix and Viavi Solutions 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.