Correlation Between STMicroelectronics and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and LPKF Laser Electronics, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and LPKF Laser.
Diversification Opportunities for STMicroelectronics and LPKF Laser
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and LPKF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV 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 STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and LPKF Laser go up and down completely randomly.
Pair Corralation between STMicroelectronics and LPKF Laser
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the LPKF Laser. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.04 times less risky than LPKF Laser. The stock trades about -0.03 of its potential returns per unit of risk. The LPKF Laser Electronics is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,116 in LPKF Laser Electronics on September 2, 2024 and sell it today you would lose (256.00) from holding LPKF Laser Electronics or give up 22.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
STMicroelectronics NV vs. LPKF Laser Electronics
Performance |
| Timeline |
| STMicroelectronics |
| LPKF Laser Electronics |
STMicroelectronics and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and LPKF Laser
The main advantage of trading using opposite STMicroelectronics and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Thyssenkrupp AG ON | STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
| LPKF Laser vs. Uniper SE | LPKF Laser vs. Mulberry Group PLC | LPKF Laser vs. London Security Plc | LPKF Laser vs. Triad Group PLC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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