Correlation Between LGL and Interlink Electronics
Can any of the company-specific risk be diversified away by investing in both LGL and Interlink Electronics 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 Interlink Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGL Group and Interlink Electronics, you can compare the effects of market volatilities on LGL and Interlink Electronics 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 Interlink Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and Interlink Electronics.
Diversification Opportunities for LGL and Interlink Electronics
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between LGL and Interlink is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Interlink Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlink Electronics 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 Interlink Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlink Electronics has no effect on the direction of LGL i.e., LGL and Interlink Electronics go up and down completely randomly.
Pair Corralation between LGL and Interlink Electronics
Considering the 90-day investment horizon LGL is expected to generate 9.87 times less return on investment than Interlink Electronics. But when comparing it to its historical volatility, LGL Group is 3.85 times less risky than Interlink Electronics. It trades about 0.07 of its potential returns per unit of risk. Interlink Electronics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 337.00 in Interlink Electronics on August 24, 2024 and sell it today you would earn a total of 119.99 from holding Interlink Electronics or generate 35.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
LGL Group vs. Interlink Electronics
Performance |
| Timeline |
| LGL Group |
| Interlink Electronics |
LGL and Interlink Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGL and Interlink Electronics
The main advantage of trading using opposite LGL and Interlink Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGL position performs unexpectedly, Interlink Electronics 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 Interlink Electronics will offset losses from the drop in Interlink Electronics' long position.The idea behind LGL Group and Interlink Electronics 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.| Interlink Electronics vs. Methode Electronics | Interlink Electronics vs. Bel Fuse A | Interlink Electronics vs. CTS Corporation | Interlink Electronics vs. MicroCloud Hologram |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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