Correlation Between LFM Properties and Wilcon Depot

Can any of the company-specific risk be diversified away by investing in both LFM Properties and Wilcon Depot 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 Wilcon Depot 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 Wilcon Depot, you can compare the effects of market volatilities on LFM Properties and Wilcon Depot 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 Wilcon Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of LFM Properties and Wilcon Depot.

Diversification Opportunities for LFM Properties and Wilcon Depot

0.65

Correlation Coefficient

LFM Properties  Wilcon Depot

Poor diversification

The 3 months correlation between LFM and Wilcon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LFM Properties Corp and Wilcon Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilcon Depot 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 Wilcon Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilcon Depot has no effect on the direction of LFM Properties i.e., LFM Properties and Wilcon Depot go up and down completely randomly.

Pair Corralation between LFM Properties and Wilcon Depot

Assuming the 90 days trading horizon LFM Properties Corp is expected to generate 2.9 times more return on investment than Wilcon Depot. However, LFM Properties is 2.9 times more volatile than Wilcon Depot. It trades about 0.07 of its potential returns per unit of risk. Wilcon Depot is currently generating about -0.36 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	Significant
Accuracy	30.65%
Values	Daily Returns

LFM Properties Corp  vs.  Wilcon Depot

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.

Wilcon Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wilcon Depot has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with LFM Properties and Wilcon Depot

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

The idea behind LFM Properties Corp and Wilcon Depot 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.