Correlation Between New Residential and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both New Residential 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 New Residential and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and LPKF Laser Electronics, you can compare the effects of market volatilities on New Residential 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 New Residential with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and LPKF Laser.
Diversification Opportunities for New Residential and LPKF Laser
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and LPKF is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment 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 New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and LPKF Laser go up and down completely randomly.
Pair Corralation between New Residential and LPKF Laser
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.52 times more return on investment than LPKF Laser. However, New Residential Investment is 1.91 times less risky than LPKF Laser. It trades about 0.07 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.01 per unit of risk. If you would invest 676.00 in New Residential Investment on September 3, 2024 and sell it today you would earn a total of 382.00 from holding New Residential Investment or generate 56.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. LPKF Laser Electronics
Performance |
| Timeline |
| New Residential Inve |
| LPKF Laser Electronics |
New Residential and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and LPKF Laser
The main advantage of trading using opposite New Residential and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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.| New Residential vs. Richardson Electronics | New Residential vs. Clean Energy Fuels | New Residential vs. Renesas Electronics | New Residential vs. METHODE ELECTRONICS |
| LPKF Laser vs. IDP EDUCATION LTD | LPKF Laser vs. EMBARK EDUCATION LTD | LPKF Laser vs. CAREER EDUCATION | LPKF Laser vs. Adtalem Global Education |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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