Correlation Between London Stock and Gaztransport

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

By analyzing existing cross correlation between London Stock Exchange and Gaztransport et Technigaz, you can compare the effects of market volatilities on London Stock and Gaztransport 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 Stock with a short position of Gaztransport. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Stock and Gaztransport.

Diversification Opportunities for London Stock and Gaztransport

0.66

Correlation Coefficient

London Stock  Gaztransport

Poor diversification

The 3 months correlation between London and Gaztransport is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Gaztransport et Technigaz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport et Technigaz and London Stock 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 Stock Exchange are associated (or correlated) with Gaztransport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport et Technigaz has no effect on the direction of London Stock i.e., London Stock and Gaztransport go up and down completely randomly.

Pair Corralation between London Stock and Gaztransport

Assuming the 90 days trading horizon London Stock Exchange is expected to generate 0.55 times more return on investment than Gaztransport. However, London Stock Exchange is 1.8 times less risky than Gaztransport. It trades about 0.12 of its potential returns per unit of risk. Gaztransport et Technigaz is currently generating about 0.05 per unit of risk. If you would invest  693,977  in London Stock Exchange on September 16, 2024 and sell it today you would earn a total of  445,023  from holding London Stock Exchange or generate 64.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

London Stock Exchange  vs.  Gaztransport et Technigaz

London Stock Exchange

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in London Stock Exchange are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, London Stock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gaztransport et Technigaz

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gaztransport is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with London Stock and Gaztransport

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

The idea behind London Stock Exchange and Gaztransport et Technigaz 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.