Correlation Between London Security and VF Corp

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

Diversification Opportunities for London Security and VF Corp

-0.46

Correlation Coefficient

London Security  VF Corp

Very good diversification

The 3 months correlation between London and 0R30 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and VF Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corp 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 VF Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corp has no effect on the direction of London Security i.e., London Security and VF Corp go up and down completely randomly.

Pair Corralation between London Security and VF Corp

Assuming the 90 days trading horizon London Security is expected to generate 1.89 times less return on investment than VF Corp. But when comparing it to its historical volatility, London Security Plc is 2.06 times less risky than VF Corp. It trades about 0.22 of its potential returns per unit of risk. VF Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,052  in VF Corp on September 24, 2024 and sell it today you would earn a total of  177.00  from holding VF Corp or generate 8.63% return on investment over 90 days.

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

London Security Plc  vs.  VF Corp

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

VF Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VF Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VF Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with London Security and VF Corp

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

The idea behind London Security Plc and VF Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..