Correlation Between LPKF Laser and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both LPKF Laser and NorAm Drilling 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 NorAm Drilling 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 NorAm Drilling AS, you can compare the effects of market volatilities on LPKF Laser and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and NorAm Drilling.
Diversification Opportunities for LPKF Laser and NorAm Drilling
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LPKF and NorAm is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of LPKF Laser i.e., LPKF Laser and NorAm Drilling go up and down completely randomly.
Pair Corralation between LPKF Laser and NorAm Drilling
Assuming the 90 days horizon LPKF Laser is expected to generate 1.05 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, LPKF Laser Electronics is 2.07 times less risky than NorAm Drilling. It trades about 0.23 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 295.00 in NorAm Drilling AS on October 16, 2024 and sell it today you would earn a total of 18.00 from holding NorAm Drilling AS or generate 6.1% 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. NorAm Drilling AS
Performance |
| Timeline |
| LPKF Laser Electronics |
| NorAm Drilling AS |
LPKF Laser and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPKF Laser and NorAm Drilling
The main advantage of trading using opposite LPKF Laser and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| LPKF Laser vs. UPDATE SOFTWARE | LPKF Laser vs. MagnaChip Semiconductor Corp | LPKF Laser vs. NTG Nordic Transport | LPKF Laser vs. Yuexiu Transport Infrastructure |
| NorAm Drilling vs. Nordic Semiconductor ASA | NorAm Drilling vs. X FAB Silicon Foundries | NorAm Drilling vs. Semiconductor Manufacturing International | NorAm Drilling vs. NXP Semiconductors NV |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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