Correlation Between LPKF Laser and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both LPKF Laser and Fevertree Drinks 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 LPKF Laser and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPKF Laser Electronics and Fevertree Drinks Plc, you can compare the effects of market volatilities on LPKF Laser and Fevertree Drinks 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 LPKF Laser with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and Fevertree Drinks.
Diversification Opportunities for LPKF Laser and Fevertree Drinks
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LPKF and Fevertree is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc and LPKF Laser 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 LPKF Laser Electronics are associated (or correlated) with Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of LPKF Laser i.e., LPKF Laser and Fevertree Drinks go up and down completely randomly.
Pair Corralation between LPKF Laser and Fevertree Drinks
Assuming the 90 days trading horizon LPKF Laser Electronics is expected to generate 1.69 times more return on investment than Fevertree Drinks. However, LPKF Laser is 1.69 times more volatile than Fevertree Drinks Plc. It trades about 0.04 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.03 per unit of risk. If you would invest 851.00 in LPKF Laser Electronics on September 19, 2024 and sell it today you would earn a total of 14.00 from holding LPKF Laser Electronics or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LPKF Laser Electronics vs. Fevertree Drinks Plc
Performance |
| Timeline |
| LPKF Laser Electronics |
| Fevertree Drinks Plc |
LPKF Laser and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPKF Laser and Fevertree Drinks
The main advantage of trading using opposite LPKF Laser and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| LPKF Laser vs. Datagroup SE | LPKF Laser vs. Public Storage | LPKF Laser vs. Alliance Data Systems | LPKF Laser vs. Samsung Electronics Co |
| Fevertree Drinks vs. Tata Steel Limited | Fevertree Drinks vs. Impax Environmental Markets | Fevertree Drinks vs. Celebrus Technologies plc | Fevertree Drinks vs. DXC Technology Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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