Correlation Between London City and Sports Entertainment

Can any of the company-specific risk be diversified away by investing in both London City and Sports Entertainment 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 London City and Sports Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between London City Equities and Sports Entertainment Group, you can compare the effects of market volatilities on London City and Sports Entertainment 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 London City with a short position of Sports Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of London City and Sports Entertainment.

Diversification Opportunities for London City and Sports Entertainment

-0.67

Correlation Coefficient

London City  Sports Entertainment

Excellent diversification

The 3 months correlation between London and Sports is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding London City Equities and Sports Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Entertainment and London City 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 London City Equities are associated (or correlated) with Sports Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Entertainment has no effect on the direction of London City i.e., London City and Sports Entertainment go up and down completely randomly.

Pair Corralation between London City and Sports Entertainment

Assuming the 90 days trading horizon London City Equities is expected to generate 0.25 times more return on investment than Sports Entertainment. However, London City Equities is 4.01 times less risky than Sports Entertainment. It trades about 0.13 of its potential returns per unit of risk. Sports Entertainment Group is currently generating about 0.03 per unit of risk. If you would invest  46.00  in London City Equities on September 30, 2024 and sell it today you would earn a total of  37.00  from holding London City Equities or generate 80.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

London City Equities  vs.  Sports Entertainment Group

London City Equities

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in London City Equities are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, London City unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sports Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sports Entertainment Group 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 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 London City and Sports Entertainment

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

The idea behind London City Equities and Sports Entertainment Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.