Correlation Between LPKF Laser and POSCO Holdings

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

Diversification Opportunities for LPKF Laser and POSCO Holdings

0.31

Correlation Coefficient

LPKF Laser  POSCO Holdings

Weak diversification

The 3 months correlation between LPKF and POSCO is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of LPKF Laser i.e., LPKF Laser and POSCO Holdings go up and down completely randomly.

Pair Corralation between LPKF Laser and POSCO Holdings

Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the POSCO Holdings. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 1.32 times less risky than POSCO Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The POSCO Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,147  in POSCO Holdings on October 11, 2024 and sell it today you would lose (887.00) from holding POSCO Holdings or give up 17.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

LPKF Laser Electronics  vs.  POSCO Holdings

LPKF Laser Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

POSCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LPKF Laser and POSCO Holdings

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

The idea behind LPKF Laser Electronics and POSCO Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.