Correlation Between PXP Energy and LFM Properties

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

By analyzing existing cross correlation between PXP Energy Corp and LFM Properties Corp, you can compare the effects of market volatilities on PXP Energy and LFM Properties 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 PXP Energy with a short position of LFM Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of PXP Energy and LFM Properties.

Diversification Opportunities for PXP Energy and LFM Properties

0.29

Correlation Coefficient

PXP Energy  LFM Properties

Modest diversification

The 3 months correlation between PXP and LFM is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PXP Energy Corp and LFM Properties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LFM Properties Corp and PXP Energy 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 PXP Energy Corp are associated (or correlated) with LFM Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LFM Properties Corp has no effect on the direction of PXP Energy i.e., PXP Energy and LFM Properties go up and down completely randomly.

Pair Corralation between PXP Energy and LFM Properties

Assuming the 90 days trading horizon PXP Energy Corp is expected to under-perform the LFM Properties. But the stock apears to be less risky and, when comparing its historical volatility, PXP Energy Corp is 2.7 times less risky than LFM Properties. The stock trades about -0.01 of its potential returns per unit of risk. The LFM Properties Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.00  in LFM Properties Corp on October 23, 2024 and sell it today you would lose (1.20) from holding LFM Properties Corp or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	56.25%
Values	Daily Returns

PXP Energy Corp  vs.  LFM Properties Corp

PXP Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PXP Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

LFM Properties Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LFM Properties Corp 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 PXP Energy and LFM Properties

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

The idea behind PXP Energy Corp and LFM Properties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.