Correlation Between LENSAR and West Red
Can any of the company-specific risk be diversified away by investing in both LENSAR and West Red 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 LENSAR and West Red into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and West Red Lake, you can compare the effects of market volatilities on LENSAR and West Red 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 LENSAR with a short position of West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and West Red.
Diversification Opportunities for LENSAR and West Red
Pay attention - limited upside
The 3 months correlation between LENSAR and West is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake and LENSAR 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 LENSAR Inc are associated (or correlated) with West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of LENSAR i.e., LENSAR and West Red go up and down completely randomly.
Pair Corralation between LENSAR and West Red
Given the investment horizon of 90 days LENSAR Inc is expected to generate 1.06 times more return on investment than West Red. However, LENSAR is 1.06 times more volatile than West Red Lake. It trades about 0.14 of its potential returns per unit of risk. West Red Lake is currently generating about 0.02 per unit of risk. If you would invest 757.00 in LENSAR Inc on October 11, 2024 and sell it today you would earn a total of 78.00 from holding LENSAR Inc or generate 10.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. West Red Lake
Performance |
| Timeline |
| LENSAR Inc |
| West Red Lake |
LENSAR and West Red Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and West Red
The main advantage of trading using opposite LENSAR and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR position performs unexpectedly, West Red 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 West Red will offset losses from the drop in West Red's long position.The idea behind LENSAR Inc and West Red Lake 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.| West Red vs. Viemed Healthcare | West Red vs. Aquestive Therapeutics | West Red vs. LENSAR Inc | West Red vs. Oatly Group AB |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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