Correlation Between LAMB and REDLANG

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

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

Diversification Opportunities for LAMB and REDLANG

0.0

Correlation Coefficient

LAMB  REDLANG

Pay attention - limited upside

The 3 months correlation between LAMB and REDLANG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LAMB and REDLANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDLANG and LAMB 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 LAMB are associated (or correlated) with REDLANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDLANG has no effect on the direction of LAMB i.e., LAMB and REDLANG go up and down completely randomly.

Pair Corralation between LAMB and REDLANG

Assuming the 90 days trading horizon LAMB is expected to generate 1.28 times more return on investment than REDLANG. However, LAMB is 1.28 times more volatile than REDLANG. It trades about 0.06 of its potential returns per unit of risk. REDLANG is currently generating about 0.06 per unit of risk. If you would invest  0.19  in LAMB on August 30, 2024 and sell it today you would earn a total of  0.02  from holding LAMB or generate 11.05% return on investment over 90 days.

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

LAMB  vs.  REDLANG

LAMB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LAMB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, LAMB exhibited solid returns over the last few months and may actually be approaching a breakup point.

REDLANG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REDLANG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, REDLANG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LAMB and REDLANG

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

The idea behind LAMB and REDLANG 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.