Correlation Between LPKF Laser and Ironveld Plc

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

Diversification Opportunities for LPKF Laser and Ironveld Plc

0.52

Correlation Coefficient

LPKF Laser  Ironveld Plc

Very weak diversification

The 3 months correlation between LPKF and Ironveld is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Ironveld Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironveld 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 Ironveld Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironveld Plc has no effect on the direction of LPKF Laser i.e., LPKF Laser and Ironveld Plc go up and down completely randomly.

Pair Corralation between LPKF Laser and Ironveld Plc

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to generate 0.4 times more return on investment than Ironveld Plc. However, LPKF Laser Electronics is 2.51 times less risky than Ironveld Plc. It trades about -0.02 of its potential returns per unit of risk. Ironveld Plc is currently generating about -0.1 per unit of risk. If you would invest  1,068  in LPKF Laser Electronics on October 9, 2024 and sell it today you would lose (166.00) from holding LPKF Laser Electronics or give up 15.54% of portfolio value over 90 days.

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

LPKF Laser Electronics  vs.  Ironveld Plc

LPKF Laser Electronics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ironveld Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ironveld Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ironveld Plc is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LPKF Laser and Ironveld Plc

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

The idea behind LPKF Laser Electronics and Ironveld 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.