Correlation Between Rumble and Lancashire Holdings

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

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

Diversification Opportunities for Rumble and Lancashire Holdings

0.23

Correlation Coefficient

Rumble  Lancashire Holdings

Modest diversification

The 3 months correlation between Rumble and Lancashire is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rumble Inc and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and Rumble 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 Rumble Inc 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 Rumble i.e., Rumble and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Rumble and Lancashire Holdings

Considering the 90-day investment horizon Rumble Inc is expected to under-perform the Lancashire Holdings. In addition to that, Rumble is 1.57 times more volatile than Lancashire Holdings. It trades about -0.48 of its total potential returns per unit of risk. Lancashire Holdings is currently generating about -0.02 per unit of volatility. If you would invest  800.00  in Lancashire Holdings on December 8, 2024 and sell it today you would lose (15.00) from holding Lancashire Holdings or give up 1.87% of portfolio value over 90 days.

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

Rumble Inc  vs.  Lancashire Holdings

Rumble Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rumble Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Rumble displayed solid returns over the last few months and may actually be approaching a breakup point.

Lancashire Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lancashire Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rumble and Lancashire Holdings

The main advantage of trading using opposite Rumble and Lancashire Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rumble 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 Rumble Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.