Correlation Between LPKF Laser and Eneraqua Technologies

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

Diversification Opportunities for LPKF Laser and Eneraqua Technologies

-0.44

Correlation Coefficient

LPKF Laser  Eneraqua Technologies

Very good diversification

The 3 months correlation between LPKF and Eneraqua is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Eneraqua Technologies PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneraqua Technologies PLC 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 Eneraqua Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneraqua Technologies PLC has no effect on the direction of LPKF Laser i.e., LPKF Laser and Eneraqua Technologies go up and down completely randomly.

Pair Corralation between LPKF Laser and Eneraqua Technologies

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to generate 0.43 times more return on investment than Eneraqua Technologies. However, LPKF Laser Electronics is 2.32 times less risky than Eneraqua Technologies. It trades about -0.02 of its potential returns per unit of risk. Eneraqua Technologies PLC is currently generating about -0.05 per unit of risk. If you would invest  1,252  in LPKF Laser Electronics on October 24, 2024 and sell it today you would lose (338.00) from holding LPKF Laser Electronics or give up 27.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LPKF Laser Electronics  vs.  Eneraqua Technologies PLC

LPKF Laser Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 4 (%) 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.

Eneraqua Technologies PLC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Eneraqua Technologies PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Eneraqua Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LPKF Laser and Eneraqua Technologies

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

The idea behind LPKF Laser Electronics and Eneraqua Technologies PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.