Correlation Between LAKE MATERIALS and DB Financial

Can any of the company-specific risk be diversified away by investing in both LAKE MATERIALS and DB Financial 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 DB Financial 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 DB Financial Investment, you can compare the effects of market volatilities on LAKE MATERIALS and DB Financial 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 DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAKE MATERIALS and DB Financial.

Diversification Opportunities for LAKE MATERIALS and DB Financial

0.66

Correlation Coefficient

LAKE MATERIALS  DB Financial

Poor diversification

The 3 months correlation between LAKE and 016610 is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment 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 DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and DB Financial go up and down completely randomly.

Pair Corralation between LAKE MATERIALS and DB Financial

Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to under-perform the DB Financial. In addition to that, LAKE MATERIALS is 1.85 times more volatile than DB Financial Investment. It trades about -0.17 of its total potential returns per unit of risk. DB Financial Investment is currently generating about -0.07 per unit of volatility. If you would invest  566,000  in DB Financial Investment on October 6, 2024 and sell it today you would lose (47,000) from holding DB Financial Investment or give up 8.3% of portfolio value over 90 days.

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

LAKE MATERIALS LTD  vs.  DB Financial Investment

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LAKE MATERIALS and DB Financial

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

The idea behind LAKE MATERIALS LTD and DB Financial Investment 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.