Correlation Between LPKF Laser and Richardson Electronics

Can any of the company-specific risk be diversified away by investing in both LPKF Laser and Richardson Electronics 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 Richardson Electronics 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 Richardson Electronics, you can compare the effects of market volatilities on LPKF Laser and Richardson Electronics 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 Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPKF Laser and Richardson Electronics.

Diversification Opportunities for LPKF Laser and Richardson Electronics

-0.41

Correlation Coefficient

LPKF Laser  Richardson Electronics

Very good diversification

The 3 months correlation between LPKF and Richardson is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics 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 Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of LPKF Laser i.e., LPKF Laser and Richardson Electronics go up and down completely randomly.

Pair Corralation between LPKF Laser and Richardson Electronics

Assuming the 90 days horizon LPKF Laser is expected to generate 5.48 times less return on investment than Richardson Electronics. In addition to that, LPKF Laser is 1.21 times more volatile than Richardson Electronics. It trades about 0.02 of its total potential returns per unit of risk. Richardson Electronics is currently generating about 0.13 per unit of volatility. If you would invest  1,059  in Richardson Electronics on September 25, 2024 and sell it today you would earn a total of  239.00  from holding Richardson Electronics or generate 22.57% return on investment over 90 days.

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

LPKF Laser Electronics  vs.  Richardson Electronics

LPKF Laser Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LPKF Laser is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Richardson Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LPKF Laser and Richardson Electronics

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

The idea behind LPKF Laser Electronics and Richardson Electronics 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.