Correlation Between Light Science and Pressure Technologies

Can any of the company-specific risk be diversified away by investing in both Light Science and Pressure Technologies 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 Light Science and Pressure Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Light Science Technologies and Pressure Technologies Plc, you can compare the effects of market volatilities on Light Science and Pressure Technologies 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 Light Science with a short position of Pressure Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light Science and Pressure Technologies.

Diversification Opportunities for Light Science and Pressure Technologies

0.09

Correlation Coefficient

Light Science  Pressure Technologies

Significant diversification

The 3 months correlation between Light and Pressure is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies and Pressure Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pressure Technologies Plc and Light Science 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 Light Science Technologies are associated (or correlated) with Pressure Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pressure Technologies Plc has no effect on the direction of Light Science i.e., Light Science and Pressure Technologies go up and down completely randomly.

Pair Corralation between Light Science and Pressure Technologies

Assuming the 90 days trading horizon Light Science Technologies is expected to under-perform the Pressure Technologies. In addition to that, Light Science is 1.78 times more volatile than Pressure Technologies Plc. It trades about -0.22 of its total potential returns per unit of risk. Pressure Technologies Plc is currently generating about 0.42 per unit of volatility. If you would invest  3,550  in Pressure Technologies Plc on October 8, 2024 and sell it today you would earn a total of  400.00  from holding Pressure Technologies Plc or generate 11.27% return on investment over 90 days.

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

Light Science Technologies  vs.  Pressure Technologies Plc

Light Science Techno

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Light Science Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Light Science is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pressure Technologies Plc

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pressure Technologies Plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Pressure Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Light Science and Pressure Technologies

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

The idea behind Light Science Technologies and Pressure Technologies Plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.