Correlation Between Proto Labs and Tredegar

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

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

Diversification Opportunities for Proto Labs and Tredegar

-0.03

Correlation Coefficient

Proto Labs  Tredegar

Good diversification

The 3 months correlation between Proto and Tredegar is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Proto Labs and Tredegar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tredegar and Proto Labs 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 Proto Labs are associated (or correlated) with Tredegar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tredegar has no effect on the direction of Proto Labs i.e., Proto Labs and Tredegar go up and down completely randomly.

Pair Corralation between Proto Labs and Tredegar

Given the investment horizon of 90 days Proto Labs is expected to under-perform the Tredegar. But the stock apears to be less risky and, when comparing its historical volatility, Proto Labs is 1.06 times less risky than Tredegar. The stock trades about -0.09 of its potential returns per unit of risk. The Tredegar is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  766.00  in Tredegar on October 24, 2024 and sell it today you would earn a total of  28.00  from holding Tredegar or generate 3.66% return on investment over 90 days.

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

Proto Labs  vs.  Tredegar

Proto Labs

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proto Labs are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Proto Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Tredegar

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tredegar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Tredegar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Proto Labs and Tredegar

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

The idea behind Proto Labs and Tredegar 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .