Correlation Between LPKF Laser and Nufarm
Can any of the company-specific risk be diversified away by investing in both LPKF Laser and Nufarm 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 LPKF Laser and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPKF Laser Electronics and Nufarm Limited, you can compare the effects of market volatilities on LPKF Laser and Nufarm 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 LPKF Laser with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and Nufarm.
Diversification Opportunities for LPKF Laser and Nufarm
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LPKF and Nufarm is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and LPKF Laser 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 LPKF Laser Electronics are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of LPKF Laser i.e., LPKF Laser and Nufarm go up and down completely randomly.
Pair Corralation between LPKF Laser and Nufarm
Assuming the 90 days horizon LPKF Laser Electronics is expected to generate 0.99 times more return on investment than Nufarm. However, LPKF Laser Electronics is 1.01 times less risky than Nufarm. It trades about 0.05 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.01 per unit of risk. If you would invest 877.00 in LPKF Laser Electronics on November 3, 2024 and sell it today you would earn a total of 13.00 from holding LPKF Laser Electronics or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPKF Laser Electronics vs. Nufarm Limited
Performance |
| Timeline |
| LPKF Laser Electronics |
| Nufarm Limited |
LPKF Laser and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPKF Laser and Nufarm
The main advantage of trading using opposite LPKF Laser and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| LPKF Laser vs. AAC TECHNOLOGHLDGADR | LPKF Laser vs. FORTRESS BIOTECHPRFA 25 | LPKF Laser vs. VELA TECHNOLPLC LS 0001 | LPKF Laser vs. BJs Restaurants |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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