Correlation Between Southern Cross and Lindian Resources
Can any of the company-specific risk be diversified away by investing in both Southern Cross and Lindian Resources 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 Southern Cross and Lindian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Cross Media and Lindian Resources, you can compare the effects of market volatilities on Southern Cross and Lindian Resources 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 Southern Cross with a short position of Lindian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Cross and Lindian Resources.
Diversification Opportunities for Southern Cross and Lindian Resources
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southern and Lindian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Southern Cross Media and Lindian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindian Resources and Southern Cross 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 Southern Cross Media are associated (or correlated) with Lindian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindian Resources has no effect on the direction of Southern Cross i.e., Southern Cross and Lindian Resources go up and down completely randomly.
Pair Corralation between Southern Cross and Lindian Resources
Assuming the 90 days trading horizon Southern Cross Media is expected to under-perform the Lindian Resources. But the stock apears to be less risky and, when comparing its historical volatility, Southern Cross Media is 1.43 times less risky than Lindian Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Lindian Resources is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Lindian Resources on October 25, 2024 and sell it today you would earn a total of 2.00 from holding Lindian Resources or generate 25.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Southern Cross Media vs. Lindian Resources
Performance |
Timeline |
Southern Cross Media |
Lindian Resources |
Southern Cross and Lindian Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southern Cross and Lindian Resources
The main advantage of trading using opposite Southern Cross and Lindian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Cross position performs unexpectedly, Lindian Resources 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 Lindian Resources will offset losses from the drop in Lindian Resources' long position.Southern Cross vs. Tombador Iron | Southern Cross vs. Pure Foods Tasmania | Southern Cross vs. Iron Road | Southern Cross vs. De Grey Mining |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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