Correlation Between LPKF Laser and American Homes

Can any of the company-specific risk be diversified away by investing in both LPKF Laser and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on LPKF Laser and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and American Homes.

Diversification Opportunities for LPKF Laser and American Homes

-0.22

Correlation Coefficient

LPKF Laser  American Homes

Very good diversification

The 3 months correlation between LPKF and American is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of LPKF Laser i.e., LPKF Laser and American Homes go up and down completely randomly.

Pair Corralation between LPKF Laser and American Homes

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to under-perform the American Homes. In addition to that, LPKF Laser is 1.54 times more volatile than American Homes 4. It trades about -0.09 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.04 per unit of volatility. If you would invest  3,635  in American Homes 4 on December 30, 2024 and sell it today you would earn a total of  97.00  from holding American Homes 4 or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

LPKF Laser Electronics  vs.  American Homes 4

LPKF Laser Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days LPKF Laser Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

American Homes 4

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, American Homes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LPKF Laser and American Homes

The main advantage of trading using opposite LPKF Laser and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPKF Laser position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.

The idea behind LPKF Laser Electronics and American Homes 4 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.