Correlation Between LGL and SigmaTron International

Can any of the company-specific risk be diversified away by investing in both LGL and SigmaTron International 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 SigmaTron International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LGL Group and SigmaTron International, you can compare the effects of market volatilities on LGL and SigmaTron International 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 SigmaTron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGL and SigmaTron International.

Diversification Opportunities for LGL and SigmaTron International

-0.86

Correlation Coefficient

LGL  SigmaTron International

Pay attention - limited upside

The 3 months correlation between LGL and SigmaTron is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International 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 SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of LGL i.e., LGL and SigmaTron International go up and down completely randomly.

Pair Corralation between LGL and SigmaTron International

Considering the 90-day investment horizon LGL Group is expected to under-perform the SigmaTron International. But the stock apears to be less risky and, when comparing its historical volatility, LGL Group is 1.01 times less risky than SigmaTron International. The stock trades about -0.06 of its potential returns per unit of risk. The SigmaTron International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  335.00  in SigmaTron International on March 5, 2024 and sell it today you would earn a total of  152.00  from holding SigmaTron International or generate 45.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LGL Group  vs.  SigmaTron International

LGL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LGL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SigmaTron International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SigmaTron International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, SigmaTron International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LGL and SigmaTron International

The main advantage of trading using opposite LGL and SigmaTron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGL position performs unexpectedly, SigmaTron International 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 SigmaTron International will offset losses from the drop in SigmaTron International's long position.

The idea behind LGL Group and SigmaTron International 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.