Correlation Between LPKF Laser and Owens Minor

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

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

Diversification Opportunities for LPKF Laser and Owens Minor

0.03

Correlation Coefficient

LPKF Laser  Owens Minor

Significant diversification

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

Pair Corralation between LPKF Laser and Owens Minor

Assuming the 90 days horizon LPKF Laser Electronics is expected to under-perform the Owens Minor. But the stock apears to be less risky and, when comparing its historical volatility, LPKF Laser Electronics is 1.03 times less risky than Owens Minor. The stock trades about -0.02 of its potential returns per unit of risk. The Owens Minor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,390  in Owens Minor on September 15, 2024 and sell it today you would lose (20.00) from holding Owens Minor or give up 1.44% of portfolio value over 90 days.

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

LPKF Laser Electronics  vs.  Owens Minor

LPKF Laser Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LPKF Laser Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LPKF Laser is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Owens Minor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Owens Minor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Owens Minor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LPKF Laser and Owens Minor

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

The idea behind LPKF Laser Electronics and Owens Minor 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.