Correlation Between Info Tek and LARGAN Precision

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

By analyzing existing cross correlation between Info Tek and LARGAN Precision Co, you can compare the effects of market volatilities on Info Tek and LARGAN Precision 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 Info Tek with a short position of LARGAN Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Info Tek and LARGAN Precision.

Diversification Opportunities for Info Tek and LARGAN Precision

0.84

Correlation Coefficient

Info Tek  LARGAN Precision

Very poor diversification

The 3 months correlation between Info and LARGAN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Info Tek and LARGAN Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LARGAN Precision and Info Tek 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 Info Tek are associated (or correlated) with LARGAN Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LARGAN Precision has no effect on the direction of Info Tek i.e., Info Tek and LARGAN Precision go up and down completely randomly.

Pair Corralation between Info Tek and LARGAN Precision

Assuming the 90 days trading horizon Info Tek is expected to under-perform the LARGAN Precision. But the stock apears to be less risky and, when comparing its historical volatility, Info Tek is 1.17 times less risky than LARGAN Precision. The stock trades about -0.12 of its potential returns per unit of risk. The LARGAN Precision Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  250,000  in LARGAN Precision Co on March 8, 2024 and sell it today you would lose (17,000) from holding LARGAN Precision Co or give up 6.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Info Tek  vs.  LARGAN Precision Co

Info Tek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Info Tek has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

LARGAN Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LARGAN Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Info Tek and LARGAN Precision

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

The idea behind Info Tek and LARGAN Precision Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.