Correlation Between Leons Furniture and Financial

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

By analyzing existing cross correlation between Leons Furniture Limited and Financial 15 Split, you can compare the effects of market volatilities on Leons Furniture and Financial 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 Leons Furniture with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Financial.

Diversification Opportunities for Leons Furniture and Financial

-0.87

Correlation Coefficient

Leons Furniture  Financial

Pay attention - limited upside

The 3 months correlation between Leons and Financial is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Leons Furniture i.e., Leons Furniture and Financial go up and down completely randomly.

Pair Corralation between Leons Furniture and Financial

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Financial. In addition to that, Leons Furniture is 6.27 times more volatile than Financial 15 Split. It trades about -0.13 of its total potential returns per unit of risk. Financial 15 Split is currently generating about -0.08 per unit of volatility. If you would invest  1,062  in Financial 15 Split on September 19, 2024 and sell it today you would lose (3.00) from holding Financial 15 Split or give up 0.28% of portfolio value over 90 days.

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

Leons Furniture Limited  vs.  Financial 15 Split

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Financial 15 Split

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leons Furniture and Financial

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

The idea behind Leons Furniture Limited and Financial 15 Split 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.