Correlation Between 3M and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both 3M and LPKF Laser 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 3M and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and LPKF Laser Electronics, you can compare the effects of market volatilities on 3M and LPKF Laser 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 3M with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and LPKF Laser.
Diversification Opportunities for 3M and LPKF Laser
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between 3M and LPKF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics and 3M 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 3M Company are associated (or correlated) with LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of 3M i.e., 3M and LPKF Laser go up and down completely randomly.
Pair Corralation between 3M and LPKF Laser
Assuming the 90 days horizon 3M Company is expected to under-perform the LPKF Laser. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 6.16 times less risky than LPKF Laser. The stock trades about -0.13 of its potential returns per unit of risk. The LPKF Laser Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 852.00 in LPKF Laser Electronics on September 27, 2024 and sell it today you would earn a total of 58.00 from holding LPKF Laser Electronics or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. LPKF Laser Electronics
Performance |
| Timeline |
| 3M Company |
| LPKF Laser Electronics |
3M and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and LPKF Laser
The main advantage of trading using opposite 3M and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.The idea behind 3M Company and LPKF Laser Electronics 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.| LPKF Laser vs. Honeywell International | LPKF Laser vs. Schneider Electric SE | LPKF Laser vs. Illinois Tool Works | LPKF Laser vs. 3M Company |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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