Correlation Between Porvair Plc and Lancashire Holdings

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

By analyzing existing cross correlation between Porvair plc and Lancashire Holdings, you can compare the effects of market volatilities on Porvair Plc and Lancashire Holdings 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 Porvair Plc with a short position of Lancashire Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porvair Plc and Lancashire Holdings.

Diversification Opportunities for Porvair Plc and Lancashire Holdings

-0.23

Correlation Coefficient

Porvair Plc  Lancashire Holdings

Very good diversification

The 3 months correlation between Porvair and Lancashire is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and Porvair Plc 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 Porvair plc are associated (or correlated) with Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Porvair Plc i.e., Porvair Plc and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Porvair Plc and Lancashire Holdings

Assuming the 90 days horizon Porvair plc is expected to generate 0.39 times more return on investment than Lancashire Holdings. However, Porvair plc is 2.6 times less risky than Lancashire Holdings. It trades about 0.14 of its potential returns per unit of risk. Lancashire Holdings is currently generating about 0.01 per unit of risk. If you would invest  822.00  in Porvair plc on October 3, 2024 and sell it today you would earn a total of  98.00  from holding Porvair plc or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Porvair plc  vs.  Lancashire Holdings

Porvair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancashire Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Lancashire Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Porvair Plc and Lancashire Holdings

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

The idea behind Porvair plc and Lancashire Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.