Correlation Between Butterfly Network and Lancashire Holdings

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

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

Diversification Opportunities for Butterfly Network and Lancashire Holdings

-0.73

Correlation Coefficient

Butterfly Network  Lancashire Holdings

Pay attention - limited upside

The 3 months correlation between Butterfly and Lancashire is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and Butterfly Network 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 Butterfly Network are associated (or correlated) with Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Butterfly Network i.e., Butterfly Network and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Butterfly Network and Lancashire Holdings

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.5 times less return on investment than Lancashire Holdings. But when comparing it to its historical volatility, Butterfly Network is 1.39 times less risky than Lancashire Holdings. It trades about 0.04 of its potential returns per unit of risk. Lancashire Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  725.00  in Lancashire Holdings on September 30, 2024 and sell it today you would earn a total of  106.00  from holding Lancashire Holdings or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.43%
Values	Daily Returns

Butterfly Network  vs.  Lancashire Holdings

Butterfly Network

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancashire Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Lancashire Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Butterfly Network and Lancashire Holdings

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

The idea behind Butterfly Network and Lancashire Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.