Correlation Between Rose Hill and LGSTW Old

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

By analyzing existing cross correlation between Rose Hill Acquisition and LGSTW Old, you can compare the effects of market volatilities on Rose Hill and LGSTW Old 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 Rose Hill with a short position of LGSTW Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rose Hill and LGSTW Old.

Diversification Opportunities for Rose Hill and LGSTW Old

0.28

Correlation Coefficient

Rose Hill  LGSTW Old

Modest diversification

The 3 months correlation between Rose and LGSTW is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rose Hill Acquisition and LGSTW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGSTW Old and Rose Hill 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 Rose Hill Acquisition are associated (or correlated) with LGSTW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGSTW Old has no effect on the direction of Rose Hill i.e., Rose Hill and LGSTW Old go up and down completely randomly.

Pair Corralation between Rose Hill and LGSTW Old

Assuming the 90 days horizon Rose Hill Acquisition is expected to generate 1.67 times more return on investment than LGSTW Old. However, Rose Hill is 1.67 times more volatile than LGSTW Old. It trades about 0.09 of its potential returns per unit of risk. LGSTW Old is currently generating about 0.12 per unit of risk. If you would invest  10.00  in Rose Hill Acquisition on October 7, 2024 and sell it today you would lose (6.62) from holding Rose Hill Acquisition or give up 66.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.56%
Values	Daily Returns

Rose Hill Acquisition  vs.  LGSTW Old

Rose Hill Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rose Hill Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Rose Hill is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

LGSTW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LGSTW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, LGSTW Old is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rose Hill and LGSTW Old

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

The idea behind Rose Hill Acquisition and LGSTW Old 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.