Correlation Between Total Soft and LF
Can any of the company-specific risk be diversified away by investing in both Total Soft and LF 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 Total Soft and LF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Soft Bank and LF Co, you can compare the effects of market volatilities on Total Soft and LF 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 Total Soft with a short position of LF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and LF.
Diversification Opportunities for Total Soft and LF
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Total and LF is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and LF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF Co and Total Soft 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 Total Soft Bank are associated (or correlated) with LF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LF Co has no effect on the direction of Total Soft i.e., Total Soft and LF go up and down completely randomly.
Pair Corralation between Total Soft and LF
Assuming the 90 days trading horizon Total Soft Bank is expected to generate 1.5 times more return on investment than LF. However, Total Soft is 1.5 times more volatile than LF Co. It trades about -0.06 of its potential returns per unit of risk. LF Co is currently generating about -0.15 per unit of risk. If you would invest 545,000 in Total Soft Bank on September 1, 2024 and sell it today you would lose (77,000) from holding Total Soft Bank or give up 14.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Total Soft Bank vs. LF Co
Performance |
| Timeline |
| Total Soft Bank |
| LF Co |
Total Soft and LF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Soft and LF
The main advantage of trading using opposite Total Soft and LF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Soft position performs unexpectedly, LF 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 LF will offset losses from the drop in LF's long position.| Total Soft vs. Devsisters corporation | Total Soft vs. Konan Technology | Total Soft vs. Nice Information Telecommunication | Total Soft vs. InfoBank |
| LF vs. Dongsin Engineering Construction | LF vs. Doosan Fuel Cell | LF vs. Daishin Balance 1 | LF vs. Total Soft Bank |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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