Correlation Between Flex and LGL
Can any of the company-specific risk be diversified away by investing in both Flex and LGL 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 Flex and LGL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and LGL Group, you can compare the effects of market volatilities on Flex and LGL 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 Flex with a short position of LGL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and LGL.
Diversification Opportunities for Flex and LGL
Poor diversification
The 3 months correlation between Flex and LGL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Flex and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group and Flex 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 Flex are associated (or correlated) with LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of Flex i.e., Flex and LGL go up and down completely randomly.
Pair Corralation between Flex and LGL
Given the investment horizon of 90 days Flex is expected to generate 2.04 times less return on investment than LGL. In addition to that, Flex is 1.32 times more volatile than LGL Group. It trades about 0.06 of its total potential returns per unit of risk. LGL Group is currently generating about 0.16 per unit of volatility. If you would invest 612.00 in LGL Group on November 5, 2024 and sell it today you would earn a total of 48.00 from holding LGL Group or generate 7.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. LGL Group
Performance |
| Timeline |
| Flex |
| LGL Group |
Flex and LGL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and LGL
The main advantage of trading using opposite Flex and LGL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex position performs unexpectedly, LGL 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 LGL will offset losses from the drop in LGL's long position.The idea behind Flex and LGL Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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