Correlation Between Loop Telecommunicatio and Action Electronics

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

By analyzing existing cross correlation between Loop Telecommunication International and Action Electronics Co, you can compare the effects of market volatilities on Loop Telecommunicatio and Action Electronics 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 Loop Telecommunicatio with a short position of Action Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loop Telecommunicatio and Action Electronics.

Diversification Opportunities for Loop Telecommunicatio and Action Electronics

-0.46

Correlation Coefficient

Loop Telecommunicatio  Action Electronics

Very good diversification

The 3 months correlation between Loop and Action is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Loop Telecommunication Interna and Action Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action Electronics and Loop Telecommunicatio 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 Loop Telecommunication International are associated (or correlated) with Action Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action Electronics has no effect on the direction of Loop Telecommunicatio i.e., Loop Telecommunicatio and Action Electronics go up and down completely randomly.

Pair Corralation between Loop Telecommunicatio and Action Electronics

Assuming the 90 days trading horizon Loop Telecommunication International is expected to generate 1.65 times more return on investment than Action Electronics. However, Loop Telecommunicatio is 1.65 times more volatile than Action Electronics Co. It trades about 0.1 of its potential returns per unit of risk. Action Electronics Co is currently generating about 0.02 per unit of risk. If you would invest  6,240  in Loop Telecommunication International on September 3, 2024 and sell it today you would earn a total of  1,250  from holding Loop Telecommunication International or generate 20.03% return on investment over 90 days.

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

Loop Telecommunication Interna  vs.  Action Electronics Co

Loop Telecommunication

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loop Telecommunication International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Loop Telecommunicatio showed solid returns over the last few months and may actually be approaching a breakup point.

Action Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Action Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Action Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Loop Telecommunicatio and Action Electronics

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

The idea behind Loop Telecommunication International and Action Electronics 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.