Correlation Between Lepanto Consolidated and Pacificonline Systems

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

Diversification Opportunities for Lepanto Consolidated and Pacificonline Systems

0.51

Correlation Coefficient

Lepanto Consolidated  Pacificonline Systems

Very weak diversification

The 3 months correlation between Lepanto and Pacificonline is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and Pacificonline Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacificonline Systems 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 Pacificonline Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacificonline Systems has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and Pacificonline Systems go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and Pacificonline Systems

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to under-perform the Pacificonline Systems. But the stock apears to be less risky and, when comparing its historical volatility, Lepanto Consolidated Mining is 1.32 times less risky than Pacificonline Systems. The stock trades about -0.1 of its potential returns per unit of risk. The Pacificonline Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  342.00  in Pacificonline Systems on October 24, 2024 and sell it today you would earn a total of  50.00  from holding Pacificonline Systems or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  Pacificonline Systems

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.

Pacificonline Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacificonline Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Pacificonline Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lepanto Consolidated and Pacificonline Systems

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

The idea behind Lepanto Consolidated Mining and Pacificonline Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.