Correlation Between Lepanto Consolidated and Bright Kindle

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

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

Diversification Opportunities for Lepanto Consolidated and Bright Kindle

-0.53

Correlation Coefficient

Lepanto Consolidated  Bright Kindle

Excellent diversification

The 3 months correlation between Lepanto and Bright is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and Bright Kindle Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Kindle Resources and Lepanto Consolidated 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 Lepanto Consolidated Mining are associated (or correlated) with Bright Kindle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Kindle Resources has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and Bright Kindle go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and Bright Kindle

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to under-perform the Bright Kindle. In addition to that, Lepanto Consolidated is 1.19 times more volatile than Bright Kindle Resources. It trades about -0.15 of its total potential returns per unit of risk. Bright Kindle Resources is currently generating about -0.02 per unit of volatility. If you would invest  77.00  in Bright Kindle Resources on September 5, 2024 and sell it today you would lose (2.00) from holding Bright Kindle Resources or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.61%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  Bright Kindle Resources

Lepanto Consolidated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Lepanto Consolidated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bright Kindle Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Kindle Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lepanto Consolidated and Bright Kindle

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

The idea behind Lepanto Consolidated Mining and Bright Kindle Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..