Correlation Between LED IBond and Broedrene

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

By analyzing existing cross correlation between LED iBond International and Broedrene AO Johansen, you can compare the effects of market volatilities on LED IBond and Broedrene 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 LED IBond with a short position of Broedrene. Check out your portfolio center. Please also check ongoing floating volatility patterns of LED IBond and Broedrene.

Diversification Opportunities for LED IBond and Broedrene

-0.71

Correlation Coefficient

LED IBond  Broedrene

Pay attention - limited upside

The 3 months correlation between LED and Broedrene is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding LED iBond International and Broedrene AO Johansen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broedrene AO Johansen and LED IBond 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 LED iBond International are associated (or correlated) with Broedrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broedrene AO Johansen has no effect on the direction of LED IBond i.e., LED IBond and Broedrene go up and down completely randomly.

Pair Corralation between LED IBond and Broedrene

Assuming the 90 days trading horizon LED iBond International is expected to generate 16.16 times more return on investment than Broedrene. However, LED IBond is 16.16 times more volatile than Broedrene AO Johansen. It trades about 0.13 of its potential returns per unit of risk. Broedrene AO Johansen is currently generating about -0.09 per unit of risk. If you would invest  16.00  in LED iBond International on October 6, 2024 and sell it today you would earn a total of  12.00  from holding LED iBond International or generate 75.0% return on investment over 90 days.

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

LED iBond International  vs.  Broedrene AO Johansen

LED iBond International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

Broedrene AO Johansen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broedrene AO Johansen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's 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 LED IBond and Broedrene

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

The idea behind LED iBond International and Broedrene AO Johansen 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.