Correlation Between LPKF Laser and Meiko Electronics

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

Diversification Opportunities for LPKF Laser and Meiko Electronics

-0.17

Correlation Coefficient

LPKF Laser  Meiko Electronics

Good diversification

The 3 months correlation between LPKF and Meiko is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics 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 Meiko Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiko Electronics has no effect on the direction of LPKF Laser i.e., LPKF Laser and Meiko Electronics go up and down completely randomly.

Pair Corralation between LPKF Laser and Meiko Electronics

Assuming the 90 days horizon LPKF Laser Electronics is expected to generate 1.72 times more return on investment than Meiko Electronics. However, LPKF Laser is 1.72 times more volatile than Meiko Electronics Co. It trades about 0.06 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.04 per unit of risk. If you would invest  838.00  in LPKF Laser Electronics on November 20, 2024 and sell it today you would earn a total of  74.00  from holding LPKF Laser Electronics or generate 8.83% return on investment over 90 days.

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

LPKF Laser Electronics  vs.  Meiko Electronics Co

LPKF Laser Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LPKF Laser reported solid returns over the last few months and may actually be approaching a breakup point.

Meiko Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Meiko Electronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LPKF Laser and Meiko Electronics

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

The idea behind LPKF Laser Electronics and Meiko Electronics Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.