Correlation Between ABBEY MORTGAGE and LIVINGTRUST MORTGAGE

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

By analyzing existing cross correlation between ABBEY MORTGAGE BANK and LIVINGTRUST MORTGAGE BANK, you can compare the effects of market volatilities on ABBEY MORTGAGE and LIVINGTRUST MORTGAGE 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 ABBEY MORTGAGE with a short position of LIVINGTRUST MORTGAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBEY MORTGAGE and LIVINGTRUST MORTGAGE.

Diversification Opportunities for ABBEY MORTGAGE and LIVINGTRUST MORTGAGE

0.48

Correlation Coefficient

ABBEY MORTGAGE  LIVINGTRUST MORTGAGE

Very weak diversification

The 3 months correlation between ABBEY and LIVINGTRUST is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ABBEY MORTGAGE BANK and LIVINGTRUST MORTGAGE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVINGTRUST MORTGAGE BANK and ABBEY MORTGAGE 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 ABBEY MORTGAGE BANK are associated (or correlated) with LIVINGTRUST MORTGAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVINGTRUST MORTGAGE BANK has no effect on the direction of ABBEY MORTGAGE i.e., ABBEY MORTGAGE and LIVINGTRUST MORTGAGE go up and down completely randomly.

Pair Corralation between ABBEY MORTGAGE and LIVINGTRUST MORTGAGE

Assuming the 90 days trading horizon ABBEY MORTGAGE is expected to generate 210.55 times less return on investment than LIVINGTRUST MORTGAGE. But when comparing it to its historical volatility, ABBEY MORTGAGE BANK is 58.84 times less risky than LIVINGTRUST MORTGAGE. It trades about 0.07 of its potential returns per unit of risk. LIVINGTRUST MORTGAGE BANK is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  174.00  in LIVINGTRUST MORTGAGE BANK on October 11, 2024 and sell it today you would earn a total of  307.00  from holding LIVINGTRUST MORTGAGE BANK or generate 176.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.13%
Values	Daily Returns

ABBEY MORTGAGE BANK  vs.  LIVINGTRUST MORTGAGE BANK

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

LIVINGTRUST MORTGAGE BANK

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LIVINGTRUST MORTGAGE BANK are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, LIVINGTRUST MORTGAGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABBEY MORTGAGE and LIVINGTRUST MORTGAGE

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

The idea behind ABBEY MORTGAGE BANK and LIVINGTRUST MORTGAGE BANK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.