Correlation Between Laser Photonics and Graco

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

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

Diversification Opportunities for Laser Photonics and Graco

0.07

Correlation Coefficient

Laser Photonics  Graco

Significant diversification

The 3 months correlation between Laser and Graco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Laser Photonics and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Laser Photonics 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 Laser Photonics are associated (or correlated) with Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of Laser Photonics i.e., Laser Photonics and Graco go up and down completely randomly.

Pair Corralation between Laser Photonics and Graco

Given the investment horizon of 90 days Laser Photonics is expected to generate 7.75 times more return on investment than Graco. However, Laser Photonics is 7.75 times more volatile than Graco Inc. It trades about 0.05 of its potential returns per unit of risk. Graco Inc is currently generating about 0.05 per unit of risk. If you would invest  403.00  in Laser Photonics on December 2, 2024 and sell it today you would lose (44.00) from holding Laser Photonics or give up 10.92% of portfolio value over 90 days.

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

Laser Photonics  vs.  Graco Inc

Laser Photonics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laser Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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.

Graco Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Laser Photonics and Graco

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

The idea behind Laser Photonics and Graco Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.