Correlation Between Murata Manufacturing and LightPath Technologies
Can any of the company-specific risk be diversified away by investing in both Murata Manufacturing and LightPath Technologies 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 Murata Manufacturing and LightPath Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murata Manufacturing Co and LightPath Technologies, you can compare the effects of market volatilities on Murata Manufacturing and LightPath Technologies 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 Murata Manufacturing with a short position of LightPath Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and LightPath Technologies.
Diversification Opportunities for Murata Manufacturing and LightPath Technologies
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Murata and LightPath is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies and Murata Manufacturing 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 Murata Manufacturing Co are associated (or correlated) with LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and LightPath Technologies go up and down completely randomly.
Pair Corralation between Murata Manufacturing and LightPath Technologies
Assuming the 90 days horizon Murata Manufacturing is expected to generate 1.71 times less return on investment than LightPath Technologies. In addition to that, Murata Manufacturing is 1.89 times more volatile than LightPath Technologies. It trades about 0.02 of its total potential returns per unit of risk. LightPath Technologies is currently generating about 0.08 per unit of volatility. If you would invest 128.00 in LightPath Technologies on August 31, 2024 and sell it today you would earn a total of 38.00 from holding LightPath Technologies or generate 29.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Murata Manufacturing Co vs. LightPath Technologies
Performance |
| Timeline |
| Murata Manufacturing |
| LightPath Technologies |
Murata Manufacturing and LightPath Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murata Manufacturing and LightPath Technologies
The main advantage of trading using opposite Murata Manufacturing and LightPath Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murata Manufacturing position performs unexpectedly, LightPath Technologies 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 LightPath Technologies will offset losses from the drop in LightPath Technologies' long position.| Murata Manufacturing vs. LightPath Technologies | Murata Manufacturing vs. Methode Electronics | Murata Manufacturing vs. OSI Systems | Murata Manufacturing vs. Plexus Corp |
| LightPath Technologies vs. Methode Electronics | LightPath Technologies vs. OSI Systems | LightPath Technologies vs. Plexus Corp | LightPath Technologies vs. CTS Corporation |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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