Correlation Between Waffer Technology and Lemtech Holdings

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

By analyzing existing cross correlation between Waffer Technology Corp and Lemtech Holdings Co, you can compare the effects of market volatilities on Waffer Technology and Lemtech Holdings 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 Waffer Technology with a short position of Lemtech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waffer Technology and Lemtech Holdings.

Diversification Opportunities for Waffer Technology and Lemtech Holdings

-0.26

Correlation Coefficient

Waffer Technology  Lemtech Holdings

Very good diversification

The 3 months correlation between Waffer and Lemtech is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Waffer Technology Corp and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings and Waffer Technology 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 Waffer Technology Corp are associated (or correlated) with Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Waffer Technology i.e., Waffer Technology and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Waffer Technology and Lemtech Holdings

Assuming the 90 days trading horizon Waffer Technology Corp is expected to generate 30.26 times more return on investment than Lemtech Holdings. However, Waffer Technology is 30.26 times more volatile than Lemtech Holdings Co. It trades about 0.07 of its potential returns per unit of risk. Lemtech Holdings Co is currently generating about 0.07 per unit of risk. If you would invest  8,710  in Waffer Technology Corp on September 28, 2024 and sell it today you would lose (1,810) from holding Waffer Technology Corp or give up 20.78% of portfolio value over 90 days.

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

Waffer Technology Corp  vs.  Lemtech Holdings Co

Waffer Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waffer Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Waffer Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lemtech Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waffer Technology and Lemtech Holdings

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

The idea behind Waffer Technology Corp and Lemtech Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.