Correlation Between Marketech International and LK Engineering
Can any of the company-specific risk be diversified away by investing in both Marketech International and LK Engineering 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 Marketech International and LK Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marketech International Corp and LK Engineering Co, you can compare the effects of market volatilities on Marketech International and LK Engineering 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 Marketech International with a short position of LK Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marketech International and LK Engineering.
Diversification Opportunities for Marketech International and LK Engineering
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Marketech and 6139 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Marketech International Corp and LK Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LK Engineering and Marketech International 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 Marketech International Corp are associated (or correlated) with LK Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LK Engineering has no effect on the direction of Marketech International i.e., Marketech International and LK Engineering go up and down completely randomly.
Pair Corralation between Marketech International and LK Engineering
Assuming the 90 days trading horizon Marketech International Corp is expected to under-perform the LK Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Marketech International Corp is 2.01 times less risky than LK Engineering. The stock trades about -0.05 of its potential returns per unit of risk. The LK Engineering Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 23,302 in LK Engineering Co on September 2, 2024 and sell it today you would lose (302.00) from holding LK Engineering Co or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marketech International Corp vs. LK Engineering Co
Performance |
| Timeline |
| Marketech International |
| LK Engineering |
Marketech International and LK Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marketech International and LK Engineering
The main advantage of trading using opposite Marketech International and LK Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marketech International position performs unexpectedly, LK Engineering 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 LK Engineering will offset losses from the drop in LK Engineering's long position.The idea behind Marketech International Corp and LK Engineering Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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