Correlation Between SAN MIGUEL and LPKF Laser

Can any of the company-specific risk be diversified away by investing in both SAN MIGUEL and LPKF Laser 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 SAN MIGUEL and LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAN MIGUEL BREWERY and LPKF Laser Electronics, you can compare the effects of market volatilities on SAN MIGUEL and LPKF Laser 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 SAN MIGUEL with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAN MIGUEL and LPKF Laser.

Diversification Opportunities for SAN MIGUEL and LPKF Laser

-0.24

Correlation Coefficient

SAN MIGUEL  LPKF Laser

Very good diversification

The 3 months correlation between SAN and LPKF is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics and SAN MIGUEL 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 SAN MIGUEL BREWERY are associated (or correlated) with LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of SAN MIGUEL i.e., SAN MIGUEL and LPKF Laser go up and down completely randomly.

Pair Corralation between SAN MIGUEL and LPKF Laser

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to generate 1.52 times more return on investment than LPKF Laser. However, SAN MIGUEL is 1.52 times more volatile than LPKF Laser Electronics. It trades about 0.0 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.02 per unit of risk. If you would invest  10.00  in SAN MIGUEL BREWERY on December 18, 2024 and sell it today you would lose (0.50) from holding SAN MIGUEL BREWERY or give up 5.0% of portfolio value over 90 days.

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

SAN MIGUEL BREWERY  vs.  LPKF Laser Electronics

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

LPKF Laser Electronics

Risk-Adjusted Performance

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.

Pair Trading with SAN MIGUEL and LPKF Laser

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

The idea behind SAN MIGUEL BREWERY and LPKF Laser Electronics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.