Correlation Between Asset Entities and Locafy

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

By analyzing existing cross correlation between Asset Entities Class and Locafy Limited, you can compare the effects of market volatilities on Asset Entities and Locafy 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 Asset Entities with a short position of Locafy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asset Entities and Locafy.

Diversification Opportunities for Asset Entities and Locafy

0.2

Correlation Coefficient

Asset Entities  Locafy

Modest diversification

The 3 months correlation between Asset and Locafy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Asset Entities Class and Locafy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy Limited and Asset Entities 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 Asset Entities Class are associated (or correlated) with Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy Limited has no effect on the direction of Asset Entities i.e., Asset Entities and Locafy go up and down completely randomly.

Pair Corralation between Asset Entities and Locafy

Given the investment horizon of 90 days Asset Entities is expected to generate 1.4 times less return on investment than Locafy. But when comparing it to its historical volatility, Asset Entities Class is 1.69 times less risky than Locafy. It trades about 0.09 of its potential returns per unit of risk. Locafy Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,670  in Locafy Limited on December 28, 2024 and sell it today you would lose (1,229) from holding Locafy Limited or give up 73.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

Asset Entities Class  vs.  Locafy Limited

Asset Entities Class

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asset Entities Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Asset Entities unveiled solid returns over the last few months and may actually be approaching a breakup point.

Locafy Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asset Entities and Locafy

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

The idea behind Asset Entities Class and Locafy Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.