Correlation Between LPKF Laser and Texas Instruments

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

Diversification Opportunities for LPKF Laser and Texas Instruments

0.7

Correlation Coefficient

LPKF Laser  Texas Instruments

Poor diversification

The 3 months correlation between LPKF and Texas is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LPKF Laser Electronics and Texas Instruments Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Instruments 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 Texas Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Instruments has no effect on the direction of LPKF Laser i.e., LPKF Laser and Texas Instruments go up and down completely randomly.

Pair Corralation between LPKF Laser and Texas Instruments

Assuming the 90 days horizon LPKF Laser Electronics is expected to generate 0.69 times more return on investment than Texas Instruments. However, LPKF Laser Electronics is 1.46 times less risky than Texas Instruments. It trades about -0.04 of its potential returns per unit of risk. Texas Instruments Incorporated is currently generating about -0.05 per unit of risk. If you would invest  904.00  in LPKF Laser Electronics on February 22, 2025 and sell it today you would lose (76.00) from holding LPKF Laser Electronics or give up 8.41% of portfolio value over 90 days.

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

LPKF Laser Electronics  vs.  Texas Instruments Incorporated

LPKF Laser Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days LPKF Laser Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Texas Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Instruments Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LPKF Laser and Texas Instruments

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

The idea behind LPKF Laser Electronics and Texas Instruments Incorporated 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.