Correlation Between LPP SA and Comp SA
Can any of the company-specific risk be diversified away by investing in both LPP SA and Comp SA 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 LPP SA and Comp SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPP SA and Comp SA, you can compare the effects of market volatilities on LPP SA and Comp SA 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 LPP SA with a short position of Comp SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPP SA and Comp SA.
Diversification Opportunities for LPP SA and Comp SA
Very weak diversification
The 3 months correlation between LPP and Comp is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding LPP SA and Comp SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comp SA and LPP SA 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 LPP SA are associated (or correlated) with Comp SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comp SA has no effect on the direction of LPP SA i.e., LPP SA and Comp SA go up and down completely randomly.
Pair Corralation between LPP SA and Comp SA
Assuming the 90 days trading horizon LPP SA is expected to generate 1.92 times less return on investment than Comp SA. But when comparing it to its historical volatility, LPP SA is 1.17 times less risky than Comp SA. It trades about 0.13 of its potential returns per unit of risk. Comp SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 12,750 in Comp SA on December 2, 2024 and sell it today you would earn a total of 3,100 from holding Comp SA or generate 24.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
LPP SA vs. Comp SA
Performance |
Timeline |
LPP SA |
Comp SA |
LPP SA and Comp SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LPP SA and Comp SA
The main advantage of trading using opposite LPP SA and Comp SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPP SA position performs unexpectedly, Comp SA 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 Comp SA will offset losses from the drop in Comp SA's long position.LPP SA vs. VR Factory Games | LPP SA vs. MW Trade SA | LPP SA vs. Creativeforge Games SA | LPP SA vs. X Trade Brokers |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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