Correlation Between ABB and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both ABB 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 ABB and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and LPKF Laser Electronics, you can compare the effects of market volatilities on ABB 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 ABB with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and LPKF Laser.
Diversification Opportunities for ABB and LPKF Laser
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABB and LPKF is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ABB 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 ABB 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 ABB 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 ABB i.e., ABB and LPKF Laser go up and down completely randomly.
Pair Corralation between ABB and LPKF Laser
Assuming the 90 days trading horizon ABB is expected to generate 1.1 times less return on investment than LPKF Laser. In addition to that, ABB is 1.06 times more volatile than LPKF Laser Electronics. It trades about 0.03 of its total potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.03 per unit of volatility. If you would invest 810.00 in LPKF Laser Electronics on September 1, 2024 and sell it today you would earn a total of 50.00 from holding LPKF Laser Electronics or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB vs. LPKF Laser Electronics
Performance |
| Timeline |
| ABB |
| LPKF Laser Electronics |
ABB and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and LPKF Laser
The main advantage of trading using opposite ABB and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB 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 ABB 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. ABB | LPKF Laser vs. Emerson Electric Co | LPKF Laser vs. Superior Plus Corp | LPKF Laser vs. NMI Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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