Correlation Between Lasertec and Photronics

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

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

Diversification Opportunities for Lasertec and Photronics

-0.28

Correlation Coefficient

Lasertec  Photronics

Very good diversification

The 3 months correlation between Lasertec and Photronics is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lasertec and Photronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photronics and Lasertec 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 Lasertec are associated (or correlated) with Photronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photronics has no effect on the direction of Lasertec i.e., Lasertec and Photronics go up and down completely randomly.

Pair Corralation between Lasertec and Photronics

Assuming the 90 days horizon Lasertec is expected to under-perform the Photronics. In addition to that, Lasertec is 1.29 times more volatile than Photronics. It trades about -0.26 of its total potential returns per unit of risk. Photronics is currently generating about 0.04 per unit of volatility. If you would invest  2,382  in Photronics on September 2, 2024 and sell it today you would earn a total of  109.00  from holding Photronics or generate 4.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Lasertec  vs.  Photronics

Lasertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Photronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Photronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Photronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lasertec and Photronics

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

The idea behind Lasertec and Photronics 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.