Correlation Between Loews Corp and Pearl Holdings

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

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

Diversification Opportunities for Loews Corp and Pearl Holdings

0.87

Correlation Coefficient

Loews Corp  Pearl Holdings

Very poor diversification

The 3 months correlation between Loews and Pearl is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and Pearl Holdings Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearl Holdings Acqui and Loews Corp 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 Loews Corp are associated (or correlated) with Pearl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearl Holdings Acqui has no effect on the direction of Loews Corp i.e., Loews Corp and Pearl Holdings go up and down completely randomly.

Pair Corralation between Loews Corp and Pearl Holdings

Taking into account the 90-day investment horizon Loews Corp is expected to generate 8.7 times more return on investment than Pearl Holdings. However, Loews Corp is 8.7 times more volatile than Pearl Holdings Acquisition. It trades about 0.15 of its potential returns per unit of risk. Pearl Holdings Acquisition is currently generating about 0.36 per unit of risk. If you would invest  8,291  in Loews Corp on September 13, 2024 and sell it today you would earn a total of  184.00  from holding Loews Corp or generate 2.22% return on investment over 90 days.

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

Loews Corp  vs.  Pearl Holdings Acquisition

Loews Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pearl Holdings Acqui

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pearl Holdings Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Pearl Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Loews Corp and Pearl Holdings

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

The idea behind Loews Corp and Pearl Holdings Acquisition 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.