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 LTD 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

0.02

Correlation Coefficient

LAKE MATERIALS  NH Investment

Significant diversification

The 3 months correlation between LAKE and 005940 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD 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 LTD 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 LTD is expected to generate 3.33 times more return on investment than NH Investment. However, LAKE MATERIALS is 3.33 times more volatile than NH Investment Securities. It trades about 0.06 of its potential returns per unit of risk. NH Investment Securities is currently generating about 0.08 per unit of risk. If you would invest  462,500  in LAKE MATERIALS LTD on September 26, 2024 and sell it today you would earn a total of  694,500  from holding LAKE MATERIALS LTD or generate 150.16% return on investment over 90 days.

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

LAKE MATERIALS LTD  vs.  NH Investment Securities

LAKE MATERIALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAKE MATERIALS LTD 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NH Investment Securities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 LTD 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..