Correlation Between LPKF Laser and SCOTT TECHNOLOGY

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

Diversification Opportunities for LPKF Laser and SCOTT TECHNOLOGY

-0.19

Correlation Coefficient

LPKF Laser  SCOTT TECHNOLOGY

Good diversification

The 3 months correlation between LPKF and SCOTT is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of LPKF Laser i.e., LPKF Laser and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between LPKF Laser and SCOTT TECHNOLOGY

Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the SCOTT TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 1.18 times less risky than SCOTT TECHNOLOGY. The stock trades about -0.01 of its potential returns per unit of risk. The SCOTT TECHNOLOGY is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  150.00  in SCOTT TECHNOLOGY on October 25, 2024 and sell it today you would lose (25.00) from holding SCOTT TECHNOLOGY or give up 16.67% of portfolio value over 90 days.

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

LPKF Laser Electronics  vs.  SCOTT TECHNOLOGY

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 fragile basic indicators, LPKF Laser may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LPKF Laser and SCOTT TECHNOLOGY

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

The idea behind LPKF Laser Electronics and SCOTT TECHNOLOGY 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 Stocks Directory module to find actively traded stocks across global markets.