Correlation Between Loctek Ergonomic and First Capital

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

By analyzing existing cross correlation between Loctek Ergonomic Technology and First Capital Securities, you can compare the effects of market volatilities on Loctek Ergonomic and First Capital 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 Loctek Ergonomic with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and First Capital.

Diversification Opportunities for Loctek Ergonomic and First Capital

0.74

Correlation Coefficient

Loctek Ergonomic  First Capital

Poor diversification

The 3 months correlation between Loctek and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and First Capital Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Securities and Loctek Ergonomic 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 Loctek Ergonomic Technology are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Securities has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and First Capital go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and First Capital

Assuming the 90 days trading horizon Loctek Ergonomic is expected to generate 2.95 times less return on investment than First Capital. But when comparing it to its historical volatility, Loctek Ergonomic Technology is 1.3 times less risky than First Capital. It trades about 0.1 of its potential returns per unit of risk. First Capital Securities is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  524.00  in First Capital Securities on September 23, 2024 and sell it today you would earn a total of  378.00  from holding First Capital Securities or generate 72.14% return on investment over 90 days.

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

Loctek Ergonomic Technology  vs.  First Capital Securities

Loctek Ergonomic Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Loctek Ergonomic sustained solid returns over the last few months and may actually be approaching a breakup point.

First Capital Securities

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital Securities are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and First Capital

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

The idea behind Loctek Ergonomic Technology and First Capital Securities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .