Correlation Between LPKF Laser and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both LPKF Laser and Richardson Electronics 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 Richardson Electronics 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 Richardson Electronics, you can compare the effects of market volatilities on LPKF Laser and Richardson Electronics 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 Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and Richardson Electronics.
Diversification Opportunities for LPKF Laser and Richardson Electronics
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LPKF and Richardson is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics 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 Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of LPKF Laser i.e., LPKF Laser and Richardson Electronics go up and down completely randomly.
Pair Corralation between LPKF Laser and Richardson Electronics
Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the Richardson Electronics. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 3.59 times less risky than Richardson Electronics. The stock trades about -0.2 of its potential returns per unit of risk. The Richardson Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Richardson Electronics on August 30, 2024 and sell it today you would earn a total of 81.00 from holding Richardson Electronics or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPKF Laser Electronics vs. Richardson Electronics
Performance |
| Timeline |
| LPKF Laser Electronics |
| Richardson Electronics |
LPKF Laser and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPKF Laser and Richardson Electronics
The main advantage of trading using opposite LPKF Laser and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, Richardson Electronics 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 Richardson Electronics will offset losses from the drop in Richardson Electronics' long position.| LPKF Laser vs. ABB | LPKF Laser vs. Superior Plus Corp | LPKF Laser vs. NMI Holdings | LPKF Laser vs. SIVERS SEMICONDUCTORS AB |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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