Correlation Between LMF Acquisition and Veeva Systems

Can any of the company-specific risk be diversified away by investing in both LMF Acquisition and Veeva Systems 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 Veeva Systems 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 Veeva Systems Class, you can compare the effects of market volatilities on LMF Acquisition and Veeva Systems 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 Veeva Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of LMF Acquisition and Veeva Systems.

Diversification Opportunities for LMF Acquisition and Veeva Systems

-0.47

Correlation Coefficient

LMF Acquisition  Veeva Systems

Very good diversification

The 3 months correlation between LMF and Veeva is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding LMF Acquisition Opportunities and Veeva Systems Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems Class 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems Class has no effect on the direction of LMF Acquisition i.e., LMF Acquisition and Veeva Systems go up and down completely randomly.

Pair Corralation between LMF Acquisition and Veeva Systems

Assuming the 90 days horizon LMF Acquisition Opportunities is expected to generate 7.34 times more return on investment than Veeva Systems. However, LMF Acquisition is 7.34 times more volatile than Veeva Systems Class. It trades about 0.07 of its potential returns per unit of risk. Veeva Systems Class is currently generating about 0.04 per unit of risk. If you would invest  3.04  in LMF Acquisition Opportunities on September 24, 2024 and sell it today you would lose (0.39) from holding LMF Acquisition Opportunities or give up 12.83% of portfolio value over 90 days.

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

LMF Acquisition Opportunities  vs.  Veeva Systems Class

LMF Acquisition Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LMF Acquisition Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain fundamental indicators, LMF Acquisition may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Veeva Systems Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LMF Acquisition and Veeva Systems

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

The idea behind LMF Acquisition Opportunities and Veeva Systems Class 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .