Correlation Between Dreamus and LF Co
Can any of the company-specific risk be diversified away by investing in both Dreamus and LF Co 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 Dreamus and LF Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreamus Company and LF Co, you can compare the effects of market volatilities on Dreamus and LF Co 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 Dreamus with a short position of LF Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreamus and LF Co.
Diversification Opportunities for Dreamus and LF Co
Average diversification
The 3 months correlation between Dreamus and 066970 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dreamus Company and LF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF Co and Dreamus 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 Dreamus Company are associated (or correlated) with LF Co. 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 Dreamus i.e., Dreamus and LF Co go up and down completely randomly.
Pair Corralation between Dreamus and LF Co
Assuming the 90 days trading horizon Dreamus Company is expected to under-perform the LF Co. But the stock apears to be less risky and, when comparing its historical volatility, Dreamus Company is 1.07 times less risky than LF Co. The stock trades about -0.05 of its potential returns per unit of risk. The LF Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 19,016,700 in LF Co on September 14, 2024 and sell it today you would lose (8,046,700) from holding LF Co or give up 42.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreamus Company vs. LF Co
Performance |
| Timeline |
| Dreamus Company |
| LF Co |
Dreamus and LF Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreamus and LF Co
The main advantage of trading using opposite Dreamus and LF Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreamus position performs unexpectedly, LF Co 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 Co will offset losses from the drop in LF Co's long position.| Dreamus vs. Polaris Office Corp | Dreamus vs. CKH Food Health | Dreamus vs. CU Medical Systems | Dreamus vs. Hanjin Transportation Co |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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