Correlation Between Helios Technologies and Luxfer Holdings

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

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

Diversification Opportunities for Helios Technologies and Luxfer Holdings

0.88

Correlation Coefficient

Helios Technologies  Luxfer Holdings

Very poor diversification

The 3 months correlation between Helios and Luxfer is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Helios Technologies 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 Helios Technologies 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 Helios Technologies 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 Helios Technologies i.e., Helios Technologies and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Helios Technologies and Luxfer Holdings

Given the investment horizon of 90 days Helios Technologies is expected to generate 1.0 times less return on investment than Luxfer Holdings. But when comparing it to its historical volatility, Helios Technologies is 1.1 times less risky than Luxfer Holdings. It trades about 0.15 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,141  in Luxfer Holdings PLC on September 3, 2024 and sell it today you would earn a total of  295.00  from holding Luxfer Holdings PLC or generate 25.85% return on investment over 90 days.

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

Helios Technologies  vs.  Luxfer Holdings PLC

Helios Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Helios Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Luxfer Holdings PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Helios Technologies and Luxfer Holdings

The main advantage of trading using opposite Helios Technologies and Luxfer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Helios Technologies 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 Helios Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.