Correlation Between LGL and Allied Motion
Can any of the company-specific risk be diversified away by investing in both LGL and Allied Motion 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 LGL and Allied Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGL Group and Allied Motion Technologies, you can compare the effects of market volatilities on LGL and Allied Motion 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 LGL with a short position of Allied Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and Allied Motion.
Diversification Opportunities for LGL and Allied Motion
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LGL and Allied is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno and LGL 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 LGL Group are associated (or correlated) with Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of LGL i.e., LGL and Allied Motion go up and down completely randomly.
Pair Corralation between LGL and Allied Motion
Considering the 90-day investment horizon LGL Group is expected to generate 1.03 times more return on investment than Allied Motion. However, LGL is 1.03 times more volatile than Allied Motion Technologies. It trades about 0.04 of its potential returns per unit of risk. Allied Motion Technologies is currently generating about 0.04 per unit of risk. If you would invest 423.00 in LGL Group on August 31, 2024 and sell it today you would earn a total of 162.00 from holding LGL Group or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.17% |
| Values | Daily Returns |
LGL Group vs. Allied Motion Technologies
Performance |
| Timeline |
| LGL Group |
| Allied Motion Techno |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
LGL and Allied Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGL and Allied Motion
The main advantage of trading using opposite LGL and Allied Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGL position performs unexpectedly, Allied Motion 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 Allied Motion will offset losses from the drop in Allied Motion's long position.The idea behind LGL Group and Allied Motion 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.| Allied Motion vs. Plexus Corp | Allied Motion vs. Sanmina | Allied Motion vs. Bel Fuse A | Allied Motion vs. Methode Electronics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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