Correlation Between Lepanto Consolidated and DL Industries

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

Diversification Opportunities for Lepanto Consolidated and DL Industries

0.76

Correlation Coefficient

Lepanto Consolidated  DL Industries

Poor diversification

The 3 months correlation between Lepanto and DNL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and DL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries 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 DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and DL Industries go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and DL Industries

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to under-perform the DL Industries. In addition to that, Lepanto Consolidated is 3.68 times more volatile than DL Industries. It trades about -0.11 of its total potential returns per unit of risk. DL Industries is currently generating about -0.14 per unit of volatility. If you would invest  655.00  in DL Industries on October 25, 2024 and sell it today you would lose (56.00) from holding DL Industries or give up 8.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  DL Industries

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 weak 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.

DL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Lepanto Consolidated and DL Industries

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

The idea behind Lepanto Consolidated Mining and DL Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.