Correlation Between LBG Media and CVR Energy

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

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

Diversification Opportunities for LBG Media and CVR Energy

0.43

Correlation Coefficient

LBG Media  CVR Energy

Very weak diversification

The 3 months correlation between LBG and CVR is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding LBG Media PLC and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and LBG Media 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 LBG Media PLC are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of LBG Media i.e., LBG Media and CVR Energy go up and down completely randomly.

Pair Corralation between LBG Media and CVR Energy

Assuming the 90 days trading horizon LBG Media PLC is expected to generate 0.85 times more return on investment than CVR Energy. However, LBG Media PLC is 1.17 times less risky than CVR Energy. It trades about 0.06 of its potential returns per unit of risk. CVR Energy is currently generating about -0.04 per unit of risk. If you would invest  8,740  in LBG Media PLC on September 14, 2024 and sell it today you would earn a total of  3,660  from holding LBG Media PLC or generate 41.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.68%
Values	Daily Returns

LBG Media PLC  vs.  CVR Energy

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with LBG Media and CVR Energy

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

The idea behind LBG Media PLC and CVR Energy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.