Correlation Between Plexus Corp and LightPath Technologies

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

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

Diversification Opportunities for Plexus Corp and LightPath Technologies

-0.32

Correlation Coefficient

Plexus Corp  LightPath Technologies

Very good diversification

The 3 months correlation between Plexus and LightPath is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies and Plexus Corp 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 Plexus Corp 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 Plexus Corp i.e., Plexus Corp and LightPath Technologies go up and down completely randomly.

Pair Corralation between Plexus Corp and LightPath Technologies

Given the investment horizon of 90 days Plexus Corp is expected to generate 0.16 times more return on investment than LightPath Technologies. However, Plexus Corp is 6.08 times less risky than LightPath Technologies. It trades about -0.34 of its potential returns per unit of risk. LightPath Technologies is currently generating about -0.16 per unit of risk. If you would invest  14,355  in Plexus Corp on November 28, 2024 and sell it today you would lose (924.00) from holding Plexus Corp or give up 6.44% of portfolio value over 90 days.

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

Plexus Corp  vs.  LightPath Technologies

Plexus Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plexus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LightPath Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LightPath Technologies are ranked lower than 10 (%) 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 Plexus Corp and LightPath Technologies

The main advantage of trading using opposite Plexus Corp and LightPath Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plexus Corp 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 Plexus Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.