Correlation Between Laser Photonics and IDEX

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

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

Diversification Opportunities for Laser Photonics and IDEX

-0.21

Correlation Coefficient

Laser Photonics  IDEX

Very good diversification

The 3 months correlation between Laser and IDEX is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Laser Photonics and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Laser Photonics i.e., Laser Photonics and IDEX go up and down completely randomly.

Pair Corralation between Laser Photonics and IDEX

Given the investment horizon of 90 days Laser Photonics is expected to under-perform the IDEX. In addition to that, Laser Photonics is 4.38 times more volatile than IDEX Corporation. It trades about -0.03 of its total potential returns per unit of risk. IDEX Corporation is currently generating about -0.1 per unit of volatility. If you would invest  23,490  in IDEX Corporation on September 7, 2024 and sell it today you would lose (645.00) from holding IDEX Corporation or give up 2.75% of portfolio value over 90 days.

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

Laser Photonics  vs.  IDEX Corp.

Laser Photonics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Laser Photonics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Laser Photonics exhibited solid returns over the last few months and may actually be approaching a breakup point.

IDEX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, IDEX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laser Photonics and IDEX

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

The idea behind Laser Photonics and IDEX Corporation 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.