Correlation Between Consolidated Construction and Linc

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

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

Diversification Opportunities for Consolidated Construction and Linc

0.41

Correlation Coefficient

Consolidated Construction  Linc

Very weak diversification

The 3 months correlation between Consolidated and Linc is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Construction Cons and Linc Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linc Limited and Consolidated Construction 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 Consolidated Construction Consortium are associated (or correlated) with Linc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linc Limited has no effect on the direction of Consolidated Construction i.e., Consolidated Construction and Linc go up and down completely randomly.

Pair Corralation between Consolidated Construction and Linc

Assuming the 90 days trading horizon Consolidated Construction Consortium is expected to generate 16.01 times more return on investment than Linc. However, Consolidated Construction is 16.01 times more volatile than Linc Limited. It trades about 0.07 of its potential returns per unit of risk. Linc Limited is currently generating about 0.04 per unit of risk. If you would invest  150.00  in Consolidated Construction Consortium on September 19, 2024 and sell it today you would earn a total of  1,650  from holding Consolidated Construction Consortium or generate 1100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

Consolidated Construction Cons  vs.  Linc Limited

Consolidated Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Construction Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Linc Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Linc Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Linc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Consolidated Construction and Linc

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

The idea behind Consolidated Construction Consortium and Linc 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.