Correlation Between Lighthouse Capital and Hosken Consolidated

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

By analyzing existing cross correlation between Lighthouse Capital and Hosken Consolidated Investments, you can compare the effects of market volatilities on Lighthouse Capital and Hosken Consolidated 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 Lighthouse Capital with a short position of Hosken Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lighthouse Capital and Hosken Consolidated.

Diversification Opportunities for Lighthouse Capital and Hosken Consolidated

-0.55

Correlation Coefficient

Lighthouse Capital  Hosken Consolidated

Excellent diversification

The 3 months correlation between Lighthouse and Hosken is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Capital and Hosken Consolidated Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hosken Consolidated and Lighthouse Capital 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 Lighthouse Capital are associated (or correlated) with Hosken Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hosken Consolidated has no effect on the direction of Lighthouse Capital i.e., Lighthouse Capital and Hosken Consolidated go up and down completely randomly.

Pair Corralation between Lighthouse Capital and Hosken Consolidated

Assuming the 90 days trading horizon Lighthouse Capital is expected to generate 0.9 times more return on investment than Hosken Consolidated. However, Lighthouse Capital is 1.11 times less risky than Hosken Consolidated. It trades about -0.05 of its potential returns per unit of risk. Hosken Consolidated Investments is currently generating about -0.16 per unit of risk. If you would invest  79,200  in Lighthouse Capital on October 25, 2024 and sell it today you would lose (3,300) from holding Lighthouse Capital or give up 4.17% of portfolio value over 90 days.

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

Lighthouse Capital  vs.  Hosken Consolidated Investment

Lighthouse Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lighthouse Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lighthouse Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hosken Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hosken Consolidated Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lighthouse Capital and Hosken Consolidated

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

The idea behind Lighthouse Capital and Hosken Consolidated Investments 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.