Correlation Between London Security and CVR Energy
Can any of the company-specific risk be diversified away by investing in both London Security and CVR Energy 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 London Security and CVR Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and CVR Energy, you can compare the effects of market volatilities on London Security and CVR Energy 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 London Security with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and CVR Energy.
Diversification Opportunities for London Security and CVR Energy
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between London and CVR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and London Security 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 London Security Plc are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of London Security i.e., London Security and CVR Energy go up and down completely randomly.
Pair Corralation between London Security and CVR Energy
Assuming the 90 days trading horizon London Security is expected to generate 1.42 times less return on investment than CVR Energy. But when comparing it to its historical volatility, London Security Plc is 1.94 times less risky than CVR Energy. It trades about 0.08 of its potential returns per unit of risk. CVR Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,875 in CVR Energy on December 30, 2024 and sell it today you would earn a total of 156.00 from holding CVR Energy or generate 8.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.38% |
Values | Daily Returns |
London Security Plc vs. CVR Energy
Performance |
Timeline |
London Security Plc |
CVR Energy |
London Security and CVR Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with London Security and CVR Energy
The main advantage of trading using opposite London Security and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, CVR Energy 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 CVR Energy will offset losses from the drop in CVR Energy's long position.London Security vs. Eastinco Mining Exploration | London Security vs. Anglo Asian Mining | London Security vs. Lundin Mining Corp | London Security vs. GoldMining |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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