Correlation Between L1 Long and Flagship Investments
Can any of the company-specific risk be diversified away by investing in both L1 Long and Flagship Investments 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 L1 Long and Flagship Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L1 Long Short and Flagship Investments, you can compare the effects of market volatilities on L1 Long and Flagship Investments 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 L1 Long with a short position of Flagship Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and Flagship Investments.
Diversification Opportunities for L1 Long and Flagship Investments
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LSF and Flagship is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and Flagship Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flagship Investments and L1 Long 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 L1 Long Short are associated (or correlated) with Flagship Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flagship Investments has no effect on the direction of L1 Long i.e., L1 Long and Flagship Investments go up and down completely randomly.
Pair Corralation between L1 Long and Flagship Investments
Assuming the 90 days trading horizon L1 Long Short is expected to under-perform the Flagship Investments. But the stock apears to be less risky and, when comparing its historical volatility, L1 Long Short is 1.47 times less risky than Flagship Investments. The stock trades about -0.16 of its potential returns per unit of risk. The Flagship Investments is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 205.00 in Flagship Investments on November 27, 2024 and sell it today you would earn a total of 19.00 from holding Flagship Investments or generate 9.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
L1 Long Short vs. Flagship Investments
Performance |
Timeline |
L1 Long Short |
Flagship Investments |
L1 Long and Flagship Investments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with L1 Long and Flagship Investments
The main advantage of trading using opposite L1 Long and Flagship Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long position performs unexpectedly, Flagship Investments 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 Flagship Investments will offset losses from the drop in Flagship Investments' long position.L1 Long vs. National Australia Bank | L1 Long vs. Kneomedia | L1 Long vs. Liberty Financial Group | L1 Long vs. Wt Financial Group |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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