Correlation Between LPKF Laser and TRAINLINE PLC

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

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

Diversification Opportunities for LPKF Laser and TRAINLINE PLC

-0.5

Correlation Coefficient

LPKF Laser  TRAINLINE PLC

Very good diversification

The 3 months correlation between LPKF and TRAINLINE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS and LPKF Laser 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 LPKF Laser Electronics are associated (or correlated) with TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of LPKF Laser i.e., LPKF Laser and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between LPKF Laser and TRAINLINE PLC

Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the TRAINLINE PLC. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 1.0 times less risky than TRAINLINE PLC. The stock trades about -0.01 of its potential returns per unit of risk. The TRAINLINE PLC LS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  330.00  in TRAINLINE PLC LS on October 4, 2024 and sell it today you would earn a total of  170.00  from holding TRAINLINE PLC LS or generate 51.52% return on investment over 90 days.

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

LPKF Laser Electronics  vs.  TRAINLINE PLC LS

LPKF Laser Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

TRAINLINE PLC LS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LPKF Laser and TRAINLINE PLC

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

The idea behind LPKF Laser Electronics and TRAINLINE PLC LS 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.