Correlation Between Lesico and RSL Electronics

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

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

Diversification Opportunities for Lesico and RSL Electronics

-0.18

Correlation Coefficient

Lesico  RSL Electronics

Good diversification

The 3 months correlation between Lesico and RSL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lesico and RSL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSL Electronics and Lesico 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 Lesico are associated (or correlated) with RSL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSL Electronics has no effect on the direction of Lesico i.e., Lesico and RSL Electronics go up and down completely randomly.

Pair Corralation between Lesico and RSL Electronics

Assuming the 90 days trading horizon Lesico is expected to generate 0.44 times more return on investment than RSL Electronics. However, Lesico is 2.26 times less risky than RSL Electronics. It trades about 0.04 of its potential returns per unit of risk. RSL Electronics is currently generating about 0.01 per unit of risk. If you would invest  35,100  in Lesico on May 6, 2025 and sell it today you would earn a total of  1,040  from holding Lesico or generate 2.96% return on investment over 90 days.

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

Lesico  vs.  RSL Electronics

Lesico

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lesico are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lesico is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RSL Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days RSL Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RSL Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lesico and RSL Electronics

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

The idea behind Lesico and RSL Electronics 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.