Correlation Between Data Storage and Laser Photonics

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

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

Diversification Opportunities for Data Storage and Laser Photonics

0.35

Correlation Coefficient

Data Storage  Laser Photonics

Weak diversification

The 3 months correlation between Data and Laser is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Data Storage Corp and Laser Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laser Photonics and Data Storage 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 Data Storage Corp are associated (or correlated) with Laser Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laser Photonics has no effect on the direction of Data Storage i.e., Data Storage and Laser Photonics go up and down completely randomly.

Pair Corralation between Data Storage and Laser Photonics

Given the investment horizon of 90 days Data Storage Corp is expected to generate 1.18 times more return on investment than Laser Photonics. However, Data Storage is 1.18 times more volatile than Laser Photonics. It trades about 0.06 of its potential returns per unit of risk. Laser Photonics is currently generating about 0.0 per unit of risk. If you would invest  390.00  in Data Storage Corp on May 20, 2025 and sell it today you would earn a total of  64.00  from holding Data Storage Corp or generate 16.41% return on investment over 90 days.

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

Data Storage Corp  vs.  Laser Photonics

Data Storage Corp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Data Storage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Laser Photonics

Risk-Adjusted Performance

Weakest

Over the last 90 days Laser Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Laser Photonics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Data Storage and Laser Photonics

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

The idea behind Data Storage Corp and Laser Photonics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.