Correlation Between LPKF Laser and RTW Venture

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

Diversification Opportunities for LPKF Laser and RTW Venture

0.72

Correlation Coefficient

LPKF Laser  RTW Venture

Poor diversification

The 3 months correlation between LPKF and RTW is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and RTW Venture Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTW Venture Fund 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 RTW Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTW Venture Fund has no effect on the direction of LPKF Laser i.e., LPKF Laser and RTW Venture go up and down completely randomly.

Pair Corralation between LPKF Laser and RTW Venture

Assuming the 90 days trading horizon LPKF Laser Electronics is expected to generate 1.57 times more return on investment than RTW Venture. However, LPKF Laser is 1.57 times more volatile than RTW Venture Fund. It trades about -0.09 of its potential returns per unit of risk. RTW Venture Fund is currently generating about -0.15 per unit of risk. If you would invest  924.00  in LPKF Laser Electronics on December 29, 2024 and sell it today you would lose (117.00) from holding LPKF Laser Electronics or give up 12.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LPKF Laser Electronics  vs.  RTW Venture Fund

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 unsteady 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.

RTW Venture Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LPKF Laser and RTW Venture

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

The idea behind LPKF Laser Electronics and RTW Venture Fund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.