Correlation Between LPKF Laser and Broadwind

Can any of the company-specific risk be diversified away by investing in both LPKF Laser and Broadwind 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 Broadwind 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 Broadwind, you can compare the effects of market volatilities on LPKF Laser and Broadwind 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 Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and Broadwind.

Diversification Opportunities for LPKF Laser and Broadwind

0.49

Correlation Coefficient

LPKF Laser  Broadwind

Very weak diversification

The 3 months correlation between LPKF and Broadwind is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind 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 Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of LPKF Laser i.e., LPKF Laser and Broadwind go up and down completely randomly.

Pair Corralation between LPKF Laser and Broadwind

Assuming the 90 days horizon LPKF Laser is expected to generate 9.46 times less return on investment than Broadwind. But when comparing it to its historical volatility, LPKF Laser Electronics is 2.64 times less risky than Broadwind. It trades about 0.05 of its potential returns per unit of risk. Broadwind is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Broadwind on October 21, 2024 and sell it today you would earn a total of  22.00  from holding Broadwind or generate 13.02% return on investment over 90 days.

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

LPKF Laser Electronics  vs.  Broadwind

LPKF Laser Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 1 (%) 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.

Broadwind

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadwind may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LPKF Laser and Broadwind

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

The idea behind LPKF Laser Electronics and Broadwind 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.