Correlation Between Dow Jones and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and LPKF Laser Electronics, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LPKF Laser.
Diversification Opportunities for Dow Jones and LPKF Laser
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and LPKF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and LPKF Laser go up and down completely randomly.
Pair Corralation between Dow Jones and LPKF Laser
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.41 times more return on investment than LPKF Laser. However, Dow Jones Industrial is 2.46 times less risky than LPKF Laser. It trades about 0.08 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 3,867,736 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 586,730 from holding Dow Jones Industrial or generate 15.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. LPKF Laser Electronics
Performance |
| Timeline |
Dow Jones and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LPKF Laser Electronics
Pair trading matchups for LPKF Laser
Pair Trading with Dow Jones and LPKF Laser
The main advantage of trading using opposite Dow Jones and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| LPKF Laser vs. Empire Metals Limited | LPKF Laser vs. Atalaya Mining | LPKF Laser vs. GoldMining | LPKF Laser vs. GreenX Metals |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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