Correlation Between Regal Beloit and Luxfer Holdings

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

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

Diversification Opportunities for Regal Beloit and Luxfer Holdings

0.76

Correlation Coefficient

Regal Beloit  Luxfer Holdings

Poor diversification

The 3 months correlation between Regal and Luxfer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Regal Beloit and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Regal Beloit 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 Regal Beloit are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Regal Beloit i.e., Regal Beloit and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Regal Beloit and Luxfer Holdings

Considering the 90-day investment horizon Regal Beloit is expected to generate 2.21 times less return on investment than Luxfer Holdings. But when comparing it to its historical volatility, Regal Beloit is 1.24 times less risky than Luxfer Holdings. It trades about 0.08 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,141  in Luxfer Holdings PLC on September 2, 2024 and sell it today you would earn a total of  295.00  from holding Luxfer Holdings PLC or generate 25.85% return on investment over 90 days.

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

Regal Beloit  vs.  Luxfer Holdings PLC

Regal Beloit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Beloit are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Regal Beloit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Luxfer Holdings PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regal Beloit and Luxfer Holdings

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

The idea behind Regal Beloit and Luxfer Holdings PLC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.