Correlation Between Lake Materials and NH Investment

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

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

Diversification Opportunities for Lake Materials and NH Investment

-0.13

Correlation Coefficient

Lake Materials  NH Investment

Good diversification

The 3 months correlation between Lake and 005940 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities and Lake Materials 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 Lake Materials Co are associated (or correlated) with NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of Lake Materials i.e., Lake Materials and NH Investment go up and down completely randomly.

Pair Corralation between Lake Materials and NH Investment

Assuming the 90 days trading horizon Lake Materials Co is expected to under-perform the NH Investment. In addition to that, Lake Materials is 2.26 times more volatile than NH Investment Securities. It trades about -0.16 of its total potential returns per unit of risk. NH Investment Securities is currently generating about 0.0 per unit of volatility. If you would invest  1,358,000  in NH Investment Securities on October 9, 2024 and sell it today you would lose (13,000) from holding NH Investment Securities or give up 0.96% of portfolio value over 90 days.

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

Lake Materials Co  vs.  NH Investment Securities

Lake Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Materials 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NH Investment Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NH Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lake Materials and NH Investment

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

The idea behind Lake Materials Co and NH Investment Securities 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.