Correlation Between Laser Photonics and Fanuc

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

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

Diversification Opportunities for Laser Photonics and Fanuc

0.5

Correlation Coefficient

Laser Photonics  Fanuc

Very weak diversification

The 3 months correlation between Laser and Fanuc is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Laser Photonics and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Laser Photonics 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 Laser Photonics are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Laser Photonics i.e., Laser Photonics and Fanuc go up and down completely randomly.

Pair Corralation between Laser Photonics and Fanuc

Given the investment horizon of 90 days Laser Photonics is expected to generate 3.25 times more return on investment than Fanuc. However, Laser Photonics is 3.25 times more volatile than Fanuc. It trades about 0.13 of its potential returns per unit of risk. Fanuc is currently generating about 0.01 per unit of risk. If you would invest  192.00  in Laser Photonics on September 30, 2024 and sell it today you would earn a total of  472.00  from holding Laser Photonics or generate 245.83% return on investment over 90 days.

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

Laser Photonics  vs.  Fanuc

Laser Photonics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laser Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Laser Photonics and Fanuc

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

The idea behind Laser Photonics and Fanuc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.