Correlation Between GT Capital and LFM Properties

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

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

Diversification Opportunities for GT Capital and LFM Properties

-0.44

Correlation Coefficient

GT Capital  LFM Properties

Very good diversification

The 3 months correlation between GTPPB and LFM is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings and LFM Properties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LFM Properties Corp and GT Capital 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 GT Capital Holdings are associated (or correlated) with LFM Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LFM Properties Corp has no effect on the direction of GT Capital i.e., GT Capital and LFM Properties go up and down completely randomly.

Pair Corralation between GT Capital and LFM Properties

Assuming the 90 days trading horizon GT Capital is expected to generate 65.59 times less return on investment than LFM Properties. But when comparing it to its historical volatility, GT Capital Holdings is 6.27 times less risky than LFM Properties. It trades about 0.01 of its potential returns per unit of risk. LFM Properties Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.40  in LFM Properties Corp on December 29, 2024 and sell it today you would earn a total of  0.20  from holding LFM Properties Corp or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	54.29%
Values	Daily Returns

GT Capital Holdings  vs.  LFM Properties Corp

GT Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, GT Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

LFM Properties Corp

Risk-Adjusted Performance

Modest

Over the last 90 days LFM Properties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical and fundamental indicators, LFM Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GT Capital and LFM Properties

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

The idea behind GT Capital Holdings and LFM Properties Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.