Correlation Between LMF Acquisition and Waters

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

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

Diversification Opportunities for LMF Acquisition and Waters

-0.36

Correlation Coefficient

LMF Acquisition  Waters

Very good diversification

The 3 months correlation between LMF and Waters is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding LMF Acquisition Opportunities and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and LMF Acquisition 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 LMF Acquisition Opportunities are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of LMF Acquisition i.e., LMF Acquisition and Waters go up and down completely randomly.

Pair Corralation between LMF Acquisition and Waters

Considering the 90-day investment horizon LMF Acquisition Opportunities is expected to generate 3.21 times more return on investment than Waters. However, LMF Acquisition is 3.21 times more volatile than Waters. It trades about 0.08 of its potential returns per unit of risk. Waters is currently generating about -0.01 per unit of risk. If you would invest  204.00  in LMF Acquisition Opportunities on December 27, 2024 and sell it today you would earn a total of  39.00  from holding LMF Acquisition Opportunities or generate 19.12% return on investment over 90 days.

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

LMF Acquisition Opportunities  vs.  Waters

LMF Acquisition Oppo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LMF Acquisition Opportunities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, LMF Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LMF Acquisition and Waters

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

The idea behind LMF Acquisition Opportunities and Waters 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.