Correlation Between LandMark Optoelectronics and Niching Industrial
Can any of the company-specific risk be diversified away by investing in both LandMark Optoelectronics and Niching Industrial 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 LandMark Optoelectronics and Niching Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LandMark Optoelectronics and Niching Industrial, you can compare the effects of market volatilities on LandMark Optoelectronics and Niching Industrial 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 LandMark Optoelectronics with a short position of Niching Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LandMark Optoelectronics and Niching Industrial.
Diversification Opportunities for LandMark Optoelectronics and Niching Industrial
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LandMark and Niching is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding LandMark Optoelectronics and Niching Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niching Industrial and LandMark Optoelectronics 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 LandMark Optoelectronics are associated (or correlated) with Niching Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niching Industrial has no effect on the direction of LandMark Optoelectronics i.e., LandMark Optoelectronics and Niching Industrial go up and down completely randomly.
Pair Corralation between LandMark Optoelectronics and Niching Industrial
Assuming the 90 days trading horizon LandMark Optoelectronics is expected to generate 2.4 times more return on investment than Niching Industrial. However, LandMark Optoelectronics is 2.4 times more volatile than Niching Industrial. It trades about 0.21 of its potential returns per unit of risk. Niching Industrial is currently generating about -0.07 per unit of risk. If you would invest 20,850 in LandMark Optoelectronics on September 12, 2024 and sell it today you would earn a total of 14,550 from holding LandMark Optoelectronics or generate 69.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LandMark Optoelectronics vs. Niching Industrial
Performance |
| Timeline |
| LandMark Optoelectronics |
| Niching Industrial |
LandMark Optoelectronics and Niching Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LandMark Optoelectronics and Niching Industrial
The main advantage of trading using opposite LandMark Optoelectronics and Niching Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LandMark Optoelectronics position performs unexpectedly, Niching Industrial 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 Niching Industrial will offset losses from the drop in Niching Industrial's long position.The idea behind LandMark Optoelectronics and Niching Industrial 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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