Correlation Between LGL and PDF Solutions

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

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

Diversification Opportunities for LGL and PDF Solutions

0.85

Correlation Coefficient

LGL  PDF Solutions

Very poor diversification

The 3 months correlation between LGL and PDF is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and PDF Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDF Solutions and LGL 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 LGL Group are associated (or correlated) with PDF Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDF Solutions has no effect on the direction of LGL i.e., LGL and PDF Solutions go up and down completely randomly.

Pair Corralation between LGL and PDF Solutions

Considering the 90-day investment horizon LGL Group is expected to generate 0.84 times more return on investment than PDF Solutions. However, LGL Group is 1.18 times less risky than PDF Solutions. It trades about 0.03 of its potential returns per unit of risk. PDF Solutions is currently generating about 0.01 per unit of risk. If you would invest  680.00  in LGL Group on May 18, 2025 and sell it today you would earn a total of  15.00  from holding LGL Group or generate 2.21% return on investment over 90 days.

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

LGL Group  vs.  PDF Solutions

LGL Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, LGL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PDF Solutions

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PDF Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, PDF Solutions is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LGL and PDF Solutions

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

The idea behind LGL Group and PDF Solutions 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.