Correlation Between Middleby Corp and Luxfer Holdings

Can any of the company-specific risk be diversified away by investing in both Middleby Corp and Luxfer 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 Middleby Corp and Luxfer Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Middleby Corp and Luxfer Holdings PLC, you can compare the effects of market volatilities on Middleby Corp and Luxfer 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 Middleby Corp with a short position of Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middleby Corp and Luxfer Holdings.

Diversification Opportunities for Middleby Corp and Luxfer Holdings

0.49

Correlation Coefficient

Middleby Corp  Luxfer Holdings

Very weak diversification

The 3 months correlation between Middleby and Luxfer is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Middleby Corp 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 Middleby Corp are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Middleby Corp i.e., Middleby Corp and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Middleby Corp and Luxfer Holdings

Given the investment horizon of 90 days Middleby Corp is expected to generate 0.77 times more return on investment than Luxfer Holdings. However, Middleby Corp is 1.3 times less risky than Luxfer Holdings. It trades about -0.02 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about -0.11 per unit of risk. If you would invest  13,709  in Middleby Corp on October 6, 2024 and sell it today you would lose (272.00) from holding Middleby Corp or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Middleby Corp  vs.  Luxfer Holdings PLC

Middleby Corp

Risk-Adjusted Performance

1 of 100

Weak

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

Luxfer Holdings PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Luxfer Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Middleby Corp and Luxfer Holdings

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

The idea behind Middleby Corp and Luxfer Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.