Correlation Between Donaldson and Luxfer Holdings
Can any of the company-specific risk be diversified away by investing in both Donaldson and Luxfer Holdings 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 Donaldson and Luxfer Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donaldson and Luxfer Holdings PLC, you can compare the effects of market volatilities on Donaldson and Luxfer Holdings 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 Donaldson with a short position of Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donaldson and Luxfer Holdings.
Diversification Opportunities for Donaldson and Luxfer Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Donaldson and Luxfer is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Donaldson 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 Donaldson are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Donaldson i.e., Donaldson and Luxfer Holdings go up and down completely randomly.
Pair Corralation between Donaldson and Luxfer Holdings
Considering the 90-day investment horizon Donaldson is expected to generate 3.46 times less return on investment than Luxfer Holdings. But when comparing it to its historical volatility, Donaldson is 4.1 times less risky than Luxfer Holdings. It trades about 0.16 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,272 in Luxfer Holdings PLC on August 23, 2024 and sell it today you would earn a total of 126.00 from holding Luxfer Holdings PLC or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Donaldson vs. Luxfer Holdings PLC
Performance |
| Timeline |
| Donaldson |
| Luxfer Holdings PLC |
Donaldson and Luxfer Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donaldson and Luxfer Holdings
The main advantage of trading using opposite Donaldson and Luxfer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donaldson position performs unexpectedly, Luxfer Holdings 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 Luxfer Holdings will offset losses from the drop in Luxfer Holdings' long position.| Donaldson vs. IDEX Corporation | Donaldson vs. Watts Water Technologies | Donaldson vs. Gorman Rupp | Donaldson vs. Enerpac Tool Group |
| Luxfer Holdings vs. Graham | Luxfer Holdings vs. Enerpac Tool Group | Luxfer Holdings vs. Kadant Inc | Luxfer Holdings vs. Omega Flex |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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