Correlation Between LF and Ecopro

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

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

Diversification Opportunities for LF and Ecopro

0.63

Correlation Coefficient

LF  Ecopro

Poor diversification

The 3 months correlation between LF and Ecopro is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LF Co and Ecopro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopro and LF 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 LF Co are associated (or correlated) with Ecopro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopro has no effect on the direction of LF i.e., LF and Ecopro go up and down completely randomly.

Pair Corralation between LF and Ecopro

Assuming the 90 days trading horizon LF Co is expected to under-perform the Ecopro. In addition to that, LF is 1.26 times more volatile than Ecopro Co. It trades about -0.07 of its total potential returns per unit of risk. Ecopro Co is currently generating about 0.02 per unit of volatility. If you would invest  5,637,255  in Ecopro Co on December 30, 2024 and sell it today you would earn a total of  42,745  from holding Ecopro Co or generate 0.76% return on investment over 90 days.

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

LF Co  vs.  Ecopro Co

LF Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days LF Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ecopro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopro Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ecopro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LF and Ecopro

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

The idea behind LF Co and Ecopro Co 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 Stocks Directory module to find actively traded stocks across global markets.