Correlation Between Alliance Data and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Alliance Data and LPKF Laser 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 Alliance Data and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and LPKF Laser Electronics, you can compare the effects of market volatilities on Alliance Data and LPKF Laser 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 Alliance Data with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and LPKF Laser.
Diversification Opportunities for Alliance Data and LPKF Laser
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alliance and LPKF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics and Alliance Data 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 Alliance Data Systems are associated (or correlated) with LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Alliance Data i.e., Alliance Data and LPKF Laser go up and down completely randomly.
Pair Corralation between Alliance Data and LPKF Laser
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 2.01 times more return on investment than LPKF Laser. However, Alliance Data is 2.01 times more volatile than LPKF Laser Electronics. It trades about 0.15 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.02 per unit of risk. If you would invest 5,015 in Alliance Data Systems on September 22, 2024 and sell it today you would earn a total of 1,116 from holding Alliance Data Systems or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
Alliance Data Systems vs. LPKF Laser Electronics
Performance |
| Timeline |
| Alliance Data Systems |
| LPKF Laser Electronics |
Alliance Data and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and LPKF Laser
The main advantage of trading using opposite Alliance Data and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.| Alliance Data vs. Samsung Electronics Co | Alliance Data vs. Samsung Electronics Co | Alliance Data vs. Hyundai Motor | Alliance Data vs. Reliance Industries Ltd |
| LPKF Laser vs. Samsung Electronics Co | LPKF Laser vs. Samsung Electronics Co | LPKF Laser vs. Hyundai Motor | LPKF Laser vs. Reliance Industries Ltd |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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