Correlation Between LGL and Daktronics
Can any of the company-specific risk be diversified away by investing in both LGL and Daktronics 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 Daktronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGL Group and Daktronics, you can compare the effects of market volatilities on LGL and Daktronics 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 Daktronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and Daktronics.
Diversification Opportunities for LGL and Daktronics
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGL and Daktronics is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Daktronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daktronics 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 Daktronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daktronics has no effect on the direction of LGL i.e., LGL and Daktronics go up and down completely randomly.
Pair Corralation between LGL and Daktronics
Considering the 90-day investment horizon LGL is expected to generate 1.43 times less return on investment than Daktronics. But when comparing it to its historical volatility, LGL Group is 1.1 times less risky than Daktronics. It trades about 0.08 of its potential returns per unit of risk. Daktronics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,326 in Daktronics on October 31, 2024 and sell it today you would earn a total of 340.00 from holding Daktronics or generate 25.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.78% |
| Values | Daily Returns |
LGL Group vs. Daktronics
Performance |
| Timeline |
| LGL Group |
| Daktronics |
LGL and Daktronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGL and Daktronics
The main advantage of trading using opposite LGL and Daktronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGL position performs unexpectedly, Daktronics 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 Daktronics will offset losses from the drop in Daktronics' long position.The idea behind LGL Group and Daktronics 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.| Daktronics vs. Plexus Corp | Daktronics vs. OSI Systems | Daktronics vs. CTS Corporation | Daktronics vs. Benchmark 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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