Correlation Between DOCDATA and LPKF Laser

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Can any of the company-specific risk be diversified away by investing in both DOCDATA and LPKF Laser 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 DOCDATA and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOCDATA and LPKF Laser Electronics, you can compare the effects of market volatilities on DOCDATA and LPKF Laser 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 DOCDATA with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOCDATA and LPKF Laser.

Diversification Opportunities for DOCDATA and LPKF Laser

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between DOCDATA and LPKF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DOCDATA and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics and DOCDATA 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 DOCDATA are associated (or correlated) with LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of DOCDATA i.e., DOCDATA and LPKF Laser go up and down completely randomly.

Pair Corralation between DOCDATA and LPKF Laser

Assuming the 90 days trading horizon DOCDATA is expected to under-perform the LPKF Laser. But the stock apears to be less risky and, when comparing its historical volatility, DOCDATA is 1.08 times less risky than LPKF Laser. The stock trades about -0.03 of its potential returns per unit of risk. The LPKF Laser Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  870.00  in LPKF Laser Electronics on October 7, 2024 and sell it today you would earn a total of  10.00  from holding LPKF Laser Electronics or generate 1.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DOCDATA  vs.  LPKF Laser Electronics

 Performance 
       Timeline  
DOCDATA 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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. Despite nearly stable basic indicators, LPKF Laser is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DOCDATA and LPKF Laser Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DOCDATA and LPKF Laser

The main advantage of trading using opposite DOCDATA and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOCDATA position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.
The idea behind DOCDATA and LPKF Laser Electronics 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.
Check out your portfolio center.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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