Correlation Between LPKF Laser and Electronic Arts

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

Diversification Opportunities for LPKF Laser and Electronic Arts

-0.67

Correlation Coefficient

LPKF Laser  Electronic Arts

Excellent diversification

The 3 months correlation between LPKF and Electronic is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of LPKF Laser i.e., LPKF Laser and Electronic Arts go up and down completely randomly.

Pair Corralation between LPKF Laser and Electronic Arts

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to under-perform the Electronic Arts. In addition to that, LPKF Laser is 1.71 times more volatile than Electronic Arts. It trades about -0.02 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.03 per unit of volatility. If you would invest  12,298  in Electronic Arts on October 5, 2024 and sell it today you would earn a total of  2,246  from holding Electronic Arts or generate 18.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

LPKF Laser Electronics  vs.  Electronic Arts

LPKF Laser Electronics

Risk-Adjusted Performance

2 of 100

Weak

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

Electronic Arts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Electronic Arts 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 Electronic Arts

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

The idea behind LPKF Laser Electronics and Electronic Arts 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.