Correlation Between Luxfer Holdings and Donaldson
Can any of the company-specific risk be diversified away by investing in both Luxfer Holdings and Donaldson 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 Luxfer Holdings and Donaldson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luxfer Holdings PLC and Donaldson, you can compare the effects of market volatilities on Luxfer Holdings and Donaldson 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 Luxfer Holdings with a short position of Donaldson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luxfer Holdings and Donaldson.
Diversification Opportunities for Luxfer Holdings and Donaldson
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Luxfer and Donaldson is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Luxfer Holdings 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 Luxfer Holdings PLC are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Luxfer Holdings i.e., Luxfer Holdings and Donaldson go up and down completely randomly.
Pair Corralation between Luxfer Holdings and Donaldson
Given the investment horizon of 90 days Luxfer Holdings PLC is expected to generate 4.1 times more return on investment than Donaldson. However, Luxfer Holdings is 4.1 times more volatile than Donaldson. It trades about 0.13 of its potential returns per unit of risk. Donaldson is currently generating about 0.16 per unit of risk. If you would invest 1,272 in Luxfer Holdings PLC on August 23, 2024 and sell it today you would earn a total of 126.00 from holding Luxfer Holdings PLC or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Luxfer Holdings PLC vs. Donaldson
Performance |
| Timeline |
| Luxfer Holdings PLC |
| Donaldson |
Luxfer Holdings and Donaldson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luxfer Holdings and Donaldson
The main advantage of trading using opposite Luxfer Holdings and Donaldson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings position performs unexpectedly, Donaldson 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 Donaldson will offset losses from the drop in Donaldson's long position.| Luxfer Holdings vs. Graham | Luxfer Holdings vs. Enerpac Tool Group | Luxfer Holdings vs. Kadant Inc | Luxfer Holdings vs. Omega Flex |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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