Correlation Between LGI and Predictive Discovery
Can any of the company-specific risk be diversified away by investing in both LGI and Predictive Discovery 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 LGI and Predictive Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI and Predictive Discovery, you can compare the effects of market volatilities on LGI and Predictive Discovery 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 LGI with a short position of Predictive Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI and Predictive Discovery.
Diversification Opportunities for LGI and Predictive Discovery
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGI and Predictive is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LGI and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery and LGI 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 LGI are associated (or correlated) with Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of LGI i.e., LGI and Predictive Discovery go up and down completely randomly.
Pair Corralation between LGI and Predictive Discovery
Assuming the 90 days trading horizon LGI is expected to under-perform the Predictive Discovery. But the stock apears to be less risky and, when comparing its historical volatility, LGI is 1.45 times less risky than Predictive Discovery. The stock trades about -0.07 of its potential returns per unit of risk. The Predictive Discovery is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Predictive Discovery on September 25, 2024 and sell it today you would lose (1.00) from holding Predictive Discovery or give up 4.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
LGI vs. Predictive Discovery
Performance |
Timeline |
LGI |
Predictive Discovery |
LGI and Predictive Discovery Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI and Predictive Discovery
The main advantage of trading using opposite LGI and Predictive Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI position performs unexpectedly, Predictive Discovery 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 Predictive Discovery will offset losses from the drop in Predictive Discovery's long position.The idea behind LGI and Predictive Discovery 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.Predictive Discovery vs. Northern Star Resources | Predictive Discovery vs. Evolution Mining | Predictive Discovery vs. Aneka Tambang Tbk | Predictive Discovery vs. Sandfire Resources NL |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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