Correlation Between Reelcause and Luxfer Holdings

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

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

Diversification Opportunities for Reelcause and Luxfer Holdings

0.39

Correlation Coefficient

Reelcause  Luxfer Holdings

Weak diversification

The 3 months correlation between Reelcause and Luxfer is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Reelcause 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 Reelcause 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 Reelcause 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 Reelcause i.e., Reelcause and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Reelcause and Luxfer Holdings

Given the investment horizon of 90 days Reelcause is expected to generate 9.07 times less return on investment than Luxfer Holdings. But when comparing it to its historical volatility, Reelcause is 2.86 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 0.08 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Luxfer Holdings PLC on October 14, 2024 and sell it today you would earn a total of  446.00  from holding Luxfer Holdings PLC or generate 57.18% return on investment over 90 days.

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

Reelcause  vs.  Luxfer Holdings PLC

Reelcause

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reelcause has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Luxfer Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luxfer Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Reelcause and Luxfer Holdings

The main advantage of trading using opposite Reelcause and Luxfer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reelcause 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 Reelcause 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.