Correlation Between Allied Motion and LightPath Technologies

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

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

Diversification Opportunities for Allied Motion and LightPath Technologies

0.78

Correlation Coefficient

Allied Motion  LightPath Technologies

Poor diversification

The 3 months correlation between Allied and LightPath is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Allied Motion Technologies and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies and Allied Motion 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 Allied Motion Technologies are associated (or correlated) with LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of Allied Motion i.e., Allied Motion and LightPath Technologies go up and down completely randomly.

Pair Corralation between Allied Motion and LightPath Technologies

If you would invest  129.00  in LightPath Technologies on September 3, 2024 and sell it today you would earn a total of  37.00  from holding LightPath Technologies or generate 28.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Allied Motion Technologies  vs.  LightPath Technologies

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

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

LightPath Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LightPath Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, LightPath Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Motion and LightPath Technologies

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

The idea behind Allied Motion Technologies and LightPath Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.