Correlation Between LPKF Laser and RTL GROUP

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

Diversification Opportunities for LPKF Laser and RTL GROUP

0.4

Correlation Coefficient

LPKF Laser  RTL GROUP

Very weak diversification

The 3 months correlation between LPKF and RTL is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and RTL GROUP UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL GROUP UNSPADR 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 RTL GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL GROUP UNSPADR has no effect on the direction of LPKF Laser i.e., LPKF Laser and RTL GROUP go up and down completely randomly.

Pair Corralation between LPKF Laser and RTL GROUP

Assuming the 90 days horizon LPKF Laser Electronics is expected to generate 1.12 times more return on investment than RTL GROUP. However, LPKF Laser is 1.12 times more volatile than RTL GROUP UNSPADR. It trades about 0.13 of its potential returns per unit of risk. RTL GROUP UNSPADR is currently generating about -0.18 per unit of risk. If you would invest  833.00  in LPKF Laser Electronics on October 11, 2024 and sell it today you would earn a total of  43.00  from holding LPKF Laser Electronics or generate 5.16% 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.  RTL GROUP UNSPADR

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.

RTL GROUP UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL GROUP UNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LPKF Laser and RTL GROUP

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

The idea behind LPKF Laser Electronics and RTL GROUP UNSPADR 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.