Correlation Between Lepanto Consolidated and Crown Asia

Can any of the company-specific risk be diversified away by investing in both Lepanto Consolidated and Crown Asia 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 Crown Asia 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 Crown Asia Chemicals, you can compare the effects of market volatilities on Lepanto Consolidated and Crown Asia 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 Crown Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lepanto Consolidated and Crown Asia.

Diversification Opportunities for Lepanto Consolidated and Crown Asia

0.83

Correlation Coefficient

Lepanto Consolidated  Crown Asia

Very poor diversification

The 3 months correlation between Lepanto and Crown is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and Crown Asia Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Asia Chemicals 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 Crown Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Asia Chemicals has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and Crown Asia go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and Crown Asia

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to under-perform the Crown Asia. In addition to that, Lepanto Consolidated is 1.56 times more volatile than Crown Asia Chemicals. It trades about -0.02 of its total potential returns per unit of risk. Crown Asia Chemicals is currently generating about 0.03 per unit of volatility. If you would invest  139.00  in Crown Asia Chemicals on October 23, 2024 and sell it today you would earn a total of  32.00  from holding Crown Asia Chemicals or generate 23.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.09%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  Crown Asia Chemicals

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepanto Consolidated Mining 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 basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Lepanto Consolidated and Crown Asia

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

The idea behind Lepanto Consolidated Mining and Crown Asia Chemicals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..