Correlation Between LB Investment and Dream Security

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

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

Diversification Opportunities for LB Investment and Dream Security

-0.03

Correlation Coefficient

LB Investment  Dream Security

Good diversification

The 3 months correlation between 309960 and Dream is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and Dream Security co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Security co and LB Investment 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 LB Investment are associated (or correlated) with Dream Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Security co has no effect on the direction of LB Investment i.e., LB Investment and Dream Security go up and down completely randomly.

Pair Corralation between LB Investment and Dream Security

Assuming the 90 days trading horizon LB Investment is expected to generate 1.25 times more return on investment than Dream Security. However, LB Investment is 1.25 times more volatile than Dream Security co. It trades about 0.05 of its potential returns per unit of risk. Dream Security co is currently generating about 0.05 per unit of risk. If you would invest  349,072  in LB Investment on November 29, 2024 and sell it today you would earn a total of  33,428  from holding LB Investment or generate 9.58% return on investment over 90 days.

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

LB Investment  vs.  Dream Security co

LB Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LB Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LB Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Dream Security co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LB Investment and Dream Security

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

The idea behind LB Investment and Dream Security 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.