Correlation Between Littelfuse and LSI Industries

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

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

Diversification Opportunities for Littelfuse and LSI Industries

0.81

Correlation Coefficient

Littelfuse  LSI Industries

Very poor diversification

The 3 months correlation between Littelfuse and LSI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Littelfuse and LSI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Industries and Littelfuse 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 Littelfuse are associated (or correlated) with LSI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Industries has no effect on the direction of Littelfuse i.e., Littelfuse and LSI Industries go up and down completely randomly.

Pair Corralation between Littelfuse and LSI Industries

If you would invest  29,655  in Littelfuse on March 18, 2024 and sell it today you would earn a total of  0.00  from holding Littelfuse or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	5.56%
Values	Daily Returns

Littelfuse  vs.  LSI Industries

Littelfuse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Littelfuse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Littelfuse is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LSI Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LSI Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LSI Industries may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Littelfuse and LSI Industries

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

The idea behind Littelfuse and LSI Industries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.