Correlation Between Lewis Group and Brimstone InvestmentLtd

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

By analyzing existing cross correlation between Lewis Group Limited and Brimstone Investment, you can compare the effects of market volatilities on Lewis Group and Brimstone InvestmentLtd 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 Lewis Group with a short position of Brimstone InvestmentLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lewis Group and Brimstone InvestmentLtd.

Diversification Opportunities for Lewis Group and Brimstone InvestmentLtd

0.52

Correlation Coefficient

Lewis Group  Brimstone InvestmentLtd

Very weak diversification

The 3 months correlation between Lewis and Brimstone is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lewis Group Limited and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone InvestmentLtd and Lewis Group 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 Lewis Group Limited are associated (or correlated) with Brimstone InvestmentLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimstone InvestmentLtd has no effect on the direction of Lewis Group i.e., Lewis Group and Brimstone InvestmentLtd go up and down completely randomly.

Pair Corralation between Lewis Group and Brimstone InvestmentLtd

Assuming the 90 days trading horizon Lewis Group Limited is expected to generate 0.78 times more return on investment than Brimstone InvestmentLtd. However, Lewis Group Limited is 1.29 times less risky than Brimstone InvestmentLtd. It trades about -0.12 of its potential returns per unit of risk. Brimstone Investment is currently generating about -0.1 per unit of risk. If you would invest  790,800  in Lewis Group Limited on December 22, 2024 and sell it today you would lose (90,800) from holding Lewis Group Limited or give up 11.48% of portfolio value over 90 days.

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

Lewis Group Limited  vs.  Brimstone Investment

Lewis Group Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lewis Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Brimstone InvestmentLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 Lewis Group and Brimstone InvestmentLtd

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

The idea behind Lewis Group Limited and Brimstone Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.