Correlation Between LSI Industries and CTS
Can any of the company-specific risk be diversified away by investing in both LSI Industries and CTS 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 LSI Industries and CTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LSI Industries and CTS Corporation, you can compare the effects of market volatilities on LSI Industries and CTS 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 LSI Industries with a short position of CTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LSI Industries and CTS.
Diversification Opportunities for LSI Industries and CTS
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LSI and CTS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding LSI Industries and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation and LSI Industries 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 LSI Industries are associated (or correlated) with CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of LSI Industries i.e., LSI Industries and CTS go up and down completely randomly.
Pair Corralation between LSI Industries and CTS
Given the investment horizon of 90 days LSI Industries is expected to generate 0.79 times more return on investment than CTS. However, LSI Industries is 1.26 times less risky than CTS. It trades about 0.41 of its potential returns per unit of risk. CTS Corporation is currently generating about 0.19 per unit of risk. If you would invest 1,619 in LSI Industries on August 24, 2024 and sell it today you would earn a total of 404.00 from holding LSI Industries or generate 24.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LSI Industries vs. CTS Corp.
Performance |
| Timeline |
| LSI Industries |
| CTS Corporation |
LSI Industries and CTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LSI Industries and CTS
The main advantage of trading using opposite LSI Industries and CTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LSI Industries position performs unexpectedly, CTS 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 CTS will offset losses from the drop in CTS's long position.| LSI Industries vs. Plexus Corp | LSI Industries vs. OSI Systems | LSI Industries vs. CTS Corporation | LSI Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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