Correlation Between LFM Properties and Figaro Coffee

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

By analyzing existing cross correlation between LFM Properties Corp and Figaro Coffee Group, you can compare the effects of market volatilities on LFM Properties and Figaro Coffee 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 LFM Properties with a short position of Figaro Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of LFM Properties and Figaro Coffee.

Diversification Opportunities for LFM Properties and Figaro Coffee

0.12

Correlation Coefficient

LFM Properties  Figaro Coffee

Average diversification

The 3 months correlation between LFM and Figaro is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding LFM Properties Corp and Figaro Coffee Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Figaro Coffee Group and LFM Properties 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 LFM Properties Corp are associated (or correlated) with Figaro Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Figaro Coffee Group has no effect on the direction of LFM Properties i.e., LFM Properties and Figaro Coffee go up and down completely randomly.

Pair Corralation between LFM Properties and Figaro Coffee

Assuming the 90 days trading horizon LFM Properties Corp is expected to generate 3.47 times more return on investment than Figaro Coffee. However, LFM Properties is 3.47 times more volatile than Figaro Coffee Group. It trades about 0.07 of its potential returns per unit of risk. Figaro Coffee Group is currently generating about -0.09 per unit of risk. If you would invest  4.40  in LFM Properties Corp on December 30, 2024 and sell it today you would earn a total of  0.20  from holding LFM Properties Corp or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	30.65%
Values	Daily Returns

LFM Properties Corp  vs.  Figaro Coffee Group

LFM Properties Corp

Risk-Adjusted Performance

Modest

Over the last 90 days LFM Properties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, LFM Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Figaro Coffee Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LFM Properties and Figaro Coffee

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

The idea behind LFM Properties Corp and Figaro Coffee Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.