Correlation Between Cotec Construction and LDG Investment

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

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

Diversification Opportunities for Cotec Construction and LDG Investment

0.59

Correlation Coefficient

Cotec Construction  LDG Investment

Very weak diversification

The 3 months correlation between Cotec and LDG is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cotec Construction JSC and LDG Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LDG Investment JSC and Cotec 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 Cotec Construction JSC are associated (or correlated) with LDG Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LDG Investment JSC has no effect on the direction of Cotec Construction i.e., Cotec Construction and LDG Investment go up and down completely randomly.

Pair Corralation between Cotec Construction and LDG Investment

Assuming the 90 days trading horizon Cotec Construction is expected to generate 1.1 times less return on investment than LDG Investment. In addition to that, Cotec Construction is 1.09 times more volatile than LDG Investment JSC. It trades about 0.4 of its total potential returns per unit of risk. LDG Investment JSC is currently generating about 0.48 per unit of volatility. If you would invest  180,000  in LDG Investment JSC on December 4, 2024 and sell it today you would earn a total of  50,000  from holding LDG Investment JSC or generate 27.78% return on investment over 90 days.

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

Cotec Construction JSC  vs.  LDG Investment JSC

Cotec Construction JSC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

LDG Investment JSC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LDG Investment JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, LDG Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cotec Construction and LDG Investment

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

The idea behind Cotec Construction JSC and LDG Investment JSC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.