Correlation Between Lealea Enterprise and First Copper

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

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

Diversification Opportunities for Lealea Enterprise and First Copper

0.61

Correlation Coefficient

Lealea Enterprise  First Copper

Poor diversification

The 3 months correlation between Lealea and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lealea Enterprise Co and First Copper Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Copper Technology and Lealea Enterprise 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 Lealea Enterprise Co are associated (or correlated) with First Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Copper Technology has no effect on the direction of Lealea Enterprise i.e., Lealea Enterprise and First Copper go up and down completely randomly.

Pair Corralation between Lealea Enterprise and First Copper

Assuming the 90 days trading horizon Lealea Enterprise Co is expected to generate 0.48 times more return on investment than First Copper. However, Lealea Enterprise Co is 2.07 times less risky than First Copper. It trades about 0.01 of its potential returns per unit of risk. First Copper Technology is currently generating about -0.02 per unit of risk. If you would invest  929.00  in Lealea Enterprise Co on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Lealea Enterprise Co or generate 0.32% return on investment over 90 days.

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

Lealea Enterprise Co  vs.  First Copper Technology

Lealea Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lealea Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lealea Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Copper Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Copper Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Copper is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lealea Enterprise and First Copper

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

The idea behind Lealea Enterprise Co and First Copper Technology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.