Correlation Between LPKF Laser and HSBC Holdings

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

Diversification Opportunities for LPKF Laser and HSBC Holdings

-0.35

Correlation Coefficient

LPKF Laser  HSBC Holdings

Very good diversification

The 3 months correlation between LPKF and HSBC is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of LPKF Laser i.e., LPKF Laser and HSBC Holdings go up and down completely randomly.

Pair Corralation between LPKF Laser and HSBC Holdings

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to under-perform the HSBC Holdings. In addition to that, LPKF Laser is 1.67 times more volatile than HSBC Holdings PLC. It trades about -0.02 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.08 per unit of volatility. If you would invest  49,965  in HSBC Holdings PLC on October 4, 2024 and sell it today you would earn a total of  28,375  from holding HSBC Holdings PLC or generate 56.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

LPKF Laser Electronics  vs.  HSBC Holdings PLC

LPKF Laser Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 3 (%) 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.

HSBC Holdings PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LPKF Laser and HSBC Holdings

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

The idea behind LPKF Laser Electronics and HSBC Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.