Correlation Between PREMIER FOODS and LPKF Laser

Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS 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 PREMIER FOODS and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PREMIER FOODS and LPKF Laser Electronics, you can compare the effects of market volatilities on PREMIER FOODS 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 PREMIER FOODS with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and LPKF Laser.

Diversification Opportunities for PREMIER FOODS and LPKF Laser

-0.04

Correlation Coefficient

PREMIER FOODS  LPKF Laser

Good diversification

The 3 months correlation between PREMIER and LPKF is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS i.e., PREMIER FOODS and LPKF Laser go up and down completely randomly.

Pair Corralation between PREMIER FOODS and LPKF Laser

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.52 times more return on investment than LPKF Laser. However, PREMIER FOODS is 1.92 times less risky than LPKF Laser. It trades about 0.11 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.0 per unit of risk. If you would invest  157.00  in PREMIER FOODS on October 5, 2024 and sell it today you would earn a total of  69.00  from holding PREMIER FOODS or generate 43.95% return on investment over 90 days.

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

PREMIER FOODS  vs.  LPKF Laser Electronics

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LPKF Laser Electronics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days LPKF Laser Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LPKF Laser is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PREMIER FOODS and LPKF Laser

The main advantage of trading using opposite PREMIER FOODS and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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 PREMIER FOODS 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.

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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 Valuation module to check real value of public entities based on technical and fundamental data.