Correlation Between Amphenol and LGL

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

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

Diversification Opportunities for Amphenol and LGL

0.01

Correlation Coefficient

Amphenol  LGL

Significant diversification

The 3 months correlation between Amphenol and LGL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Amphenol and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group and Amphenol 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 Amphenol are associated (or correlated) with LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of Amphenol i.e., Amphenol and LGL go up and down completely randomly.

Pair Corralation between Amphenol and LGL

Considering the 90-day investment horizon Amphenol is expected to generate 0.46 times more return on investment than LGL. However, Amphenol is 2.17 times less risky than LGL. It trades about 0.18 of its potential returns per unit of risk. LGL Group is currently generating about 0.01 per unit of risk. If you would invest  6,175  in Amphenol on August 31, 2024 and sell it today you would earn a total of  1,099  from holding Amphenol or generate 17.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Amphenol  vs.  LGL Group

Amphenol

Risk-Adjusted Performance

13 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

LGL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LGL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, LGL is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Amphenol and LGL

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

The idea behind Amphenol and LGL Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.