Correlation Between LS Materials and Barunson Entertainment

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

By analyzing existing cross correlation between LS Materials and Barunson Entertainment Arts, you can compare the effects of market volatilities on LS Materials and Barunson Entertainment 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 LS Materials with a short position of Barunson Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Materials and Barunson Entertainment.

Diversification Opportunities for LS Materials and Barunson Entertainment

0.72

Correlation Coefficient

LS Materials  Barunson Entertainment

Poor diversification

The 3 months correlation between 417200 and Barunson is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and Barunson Entertainment Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barunson Entertainment and LS 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 LS Materials are associated (or correlated) with Barunson Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barunson Entertainment has no effect on the direction of LS Materials i.e., LS Materials and Barunson Entertainment go up and down completely randomly.

Pair Corralation between LS Materials and Barunson Entertainment

Assuming the 90 days trading horizon LS Materials is expected to generate 2.59 times more return on investment than Barunson Entertainment. However, LS Materials is 2.59 times more volatile than Barunson Entertainment Arts. It trades about 0.32 of its potential returns per unit of risk. Barunson Entertainment Arts is currently generating about -0.02 per unit of risk. If you would invest  1,124,000  in LS Materials on October 23, 2024 and sell it today you would earn a total of  353,000  from holding LS Materials or generate 31.41% return on investment over 90 days.

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

LS Materials  vs.  Barunson Entertainment Arts

LS Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Barunson Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barunson Entertainment Arts 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 LS Materials and Barunson Entertainment

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

The idea behind LS Materials and Barunson Entertainment Arts 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.