Correlation Between Luxfer Holdings and Aehr Test

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

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

Diversification Opportunities for Luxfer Holdings and Aehr Test

-0.37

Correlation Coefficient

Luxfer Holdings  Aehr Test

Very good diversification

The 3 months correlation between Luxfer and Aehr is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems and Luxfer Holdings 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 Luxfer Holdings PLC are associated (or correlated) with Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of Luxfer Holdings i.e., Luxfer Holdings and Aehr Test go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Aehr Test

Given the investment horizon of 90 days Luxfer Holdings is expected to generate 3.9 times less return on investment than Aehr Test. But when comparing it to its historical volatility, Luxfer Holdings PLC is 1.69 times less risky than Aehr Test. It trades about 0.03 of its potential returns per unit of risk. Aehr Test Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Aehr Test Systems on September 5, 2024 and sell it today you would earn a total of  51.00  from holding Aehr Test Systems or generate 4.36% return on investment over 90 days.

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

Luxfer Holdings PLC  vs.  Aehr Test Systems

Luxfer Holdings PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Aehr Test Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Aehr Test is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Luxfer Holdings and Aehr Test

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

The idea behind Luxfer Holdings PLC and Aehr Test Systems 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.