Correlation Between Graham and Luxfer Holdings

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

By analyzing existing cross correlation between Graham and Luxfer Holdings PLC, you can compare the effects of market volatilities on Graham and Luxfer 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 Graham with a short position of Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Luxfer Holdings.

Diversification Opportunities for Graham and Luxfer Holdings

0.64

Correlation Coefficient

Graham  Luxfer Holdings

Poor diversification

The 3 months correlation between Graham and Luxfer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Graham 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 Graham are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Graham i.e., Graham and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Graham and Luxfer Holdings

Considering the 90-day investment horizon Graham is expected to generate 1.11 times more return on investment than Luxfer Holdings. However, Graham is 1.11 times more volatile than Luxfer Holdings PLC. It trades about 0.21 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.16 per unit of risk. If you would invest  2,965  in Graham on August 31, 2024 and sell it today you would earn a total of  1,417  from holding Graham or generate 47.79% return on investment over 90 days.

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

Graham  vs.  Luxfer Holdings PLC

Graham

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Graham are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Graham displayed solid returns over the last few months and may actually be approaching a breakup point.

Luxfer Holdings PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graham and Luxfer Holdings

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

The idea behind Graham and Luxfer 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.