Correlation Between VIRG NATL and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both VIRG NATL 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 VIRG NATL and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VIRG NATL BANKSH and LPKF Laser Electronics, you can compare the effects of market volatilities on VIRG NATL 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 VIRG NATL with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRG NATL and LPKF Laser.
Diversification Opportunities for VIRG NATL and LPKF Laser
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VIRG and LPKF is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH 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 VIRG NATL 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 VIRG NATL BANKSH 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 VIRG NATL i.e., VIRG NATL and LPKF Laser go up and down completely randomly.
Pair Corralation between VIRG NATL and LPKF Laser
Assuming the 90 days horizon VIRG NATL BANKSH is expected to generate 1.18 times more return on investment than LPKF Laser. However, VIRG NATL is 1.18 times more volatile than LPKF Laser Electronics. It trades about 0.02 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.22 per unit of risk. If you would invest 3,888 in VIRG NATL BANKSH on September 12, 2024 and sell it today you would earn a total of 12.00 from holding VIRG NATL BANKSH or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VIRG NATL BANKSH vs. LPKF Laser Electronics
Performance |
| Timeline |
| VIRG NATL BANKSH |
| LPKF Laser Electronics |
VIRG NATL and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VIRG NATL and LPKF Laser
The main advantage of trading using opposite VIRG NATL and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIRG NATL 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.The idea behind VIRG NATL BANKSH and LPKF Laser 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.| LPKF Laser vs. Schneider Electric SE | LPKF Laser vs. Superior Plus Corp | LPKF Laser vs. SIVERS SEMICONDUCTORS AB | LPKF Laser vs. Norsk Hydro ASA |
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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