Correlation Between Light Wonder and Bannerman Resources

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

By analyzing existing cross correlation between Light Wonder and Bannerman Resources, you can compare the effects of market volatilities on Light Wonder and Bannerman Resources 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 Light Wonder with a short position of Bannerman Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light Wonder and Bannerman Resources.

Diversification Opportunities for Light Wonder and Bannerman Resources

-0.81

Correlation Coefficient

Light Wonder  Bannerman Resources

Pay attention - limited upside

The 3 months correlation between Light and Bannerman is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Bannerman Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Light Wonder 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 Light Wonder are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Light Wonder i.e., Light Wonder and Bannerman Resources go up and down completely randomly.

Pair Corralation between Light Wonder and Bannerman Resources

Assuming the 90 days trading horizon Light Wonder is expected to under-perform the Bannerman Resources. But the stock apears to be less risky and, when comparing its historical volatility, Light Wonder is 1.18 times less risky than Bannerman Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Bannerman Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  224.00  in Bannerman Resources on September 17, 2024 and sell it today you would earn a total of  77.00  from holding Bannerman Resources or generate 34.37% return on investment over 90 days.

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

Light Wonder  vs.  Bannerman Resources

Light Wonder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Wonder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bannerman Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bannerman Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Light Wonder and Bannerman Resources

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

The idea behind Light Wonder and Bannerman Resources 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.