Correlation Between LSI Industries and Benchmark Electronics

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

By analyzing existing cross correlation between LSI Industries and Benchmark Electronics, you can compare the effects of market volatilities on LSI Industries and Benchmark Electronics 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 LSI Industries with a short position of Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LSI Industries and Benchmark Electronics.

Diversification Opportunities for LSI Industries and Benchmark Electronics

0.46

Correlation Coefficient

LSI Industries  Benchmark Electronics

Very weak diversification

The 3 months correlation between LSI and Benchmark is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LSI Industries and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and LSI Industries 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 LSI Industries are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of LSI Industries i.e., LSI Industries and Benchmark Electronics go up and down completely randomly.

Pair Corralation between LSI Industries and Benchmark Electronics

Given the investment horizon of 90 days LSI Industries is expected to generate 1.95 times more return on investment than Benchmark Electronics. However, LSI Industries is 1.95 times more volatile than Benchmark Electronics. It trades about -0.03 of its potential returns per unit of risk. Benchmark Electronics is currently generating about -0.12 per unit of risk. If you would invest  1,935  in LSI Industries on December 28, 2024 and sell it today you would lose (216.00) from holding LSI Industries or give up 11.16% of portfolio value over 90 days.

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

LSI Industries  vs.  Benchmark Electronics

LSI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LSI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Benchmark Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LSI Industries and Benchmark Electronics

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

The idea behind LSI Industries and Benchmark Electronics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.