Correlation Between LENSAR and First CommunityPFD

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

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

Diversification Opportunities for LENSAR and First CommunityPFD

-0.44

Correlation Coefficient

LENSAR  First CommunityPFD

Very good diversification

The 3 months correlation between LENSAR and First is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD and LENSAR 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 LENSAR Inc are associated (or correlated) with First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of LENSAR i.e., LENSAR and First CommunityPFD go up and down completely randomly.

Pair Corralation between LENSAR and First CommunityPFD

Given the investment horizon of 90 days LENSAR Inc is expected to generate 29.09 times more return on investment than First CommunityPFD. However, LENSAR is 29.09 times more volatile than First Community. It trades about 0.17 of its potential returns per unit of risk. First Community is currently generating about -0.13 per unit of risk. If you would invest  837.00  in LENSAR Inc on December 25, 2024 and sell it today you would earn a total of  580.00  from holding LENSAR Inc or generate 69.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

LENSAR Inc  vs.  First Community

LENSAR Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

First CommunityPFD

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First CommunityPFD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LENSAR and First CommunityPFD

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

The idea behind LENSAR Inc and First Community 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.