Correlation Between LGL and Plexus Corp
Can any of the company-specific risk be diversified away by investing in both LGL and Plexus Corp 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 Plexus Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGL Group and Plexus Corp, you can compare the effects of market volatilities on LGL and Plexus Corp 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 Plexus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and Plexus Corp.
Diversification Opportunities for LGL and Plexus Corp
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGL and Plexus is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of LGL i.e., LGL and Plexus Corp go up and down completely randomly.
Pair Corralation between LGL and Plexus Corp
Considering the 90-day investment horizon LGL is expected to generate 15.7 times less return on investment than Plexus Corp. But when comparing it to its historical volatility, LGL Group is 1.18 times less risky than Plexus Corp. It trades about 0.02 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 14,332 in Plexus Corp on August 27, 2024 and sell it today you would earn a total of 1,869 from holding Plexus Corp or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGL Group vs. Plexus Corp
Performance |
| Timeline |
| LGL Group |
| Plexus Corp |
LGL and Plexus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGL and Plexus Corp
The main advantage of trading using opposite LGL and Plexus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGL position performs unexpectedly, Plexus Corp 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 Plexus Corp will offset losses from the drop in Plexus Corp's long position.The idea behind LGL Group and Plexus Corp 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.| Plexus Corp vs. Celestica | Plexus Corp vs. Benchmark Electronics | Plexus Corp vs. Flex | Plexus Corp vs. Jabil Circuit |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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