Correlation Between LF and Ananti
Can any of the company-specific risk be diversified away by investing in both LF and Ananti 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 LF and Ananti into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LF Co and Ananti Inc, you can compare the effects of market volatilities on LF and Ananti 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 LF with a short position of Ananti. Check out your portfolio center. Please also check ongoing floating volatility patterns of LF and Ananti.
Diversification Opportunities for LF and Ananti
Significant diversification
The 3 months correlation between LF and Ananti is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding LF Co and Ananti Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ananti Inc and LF 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 LF Co are associated (or correlated) with Ananti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ananti Inc has no effect on the direction of LF i.e., LF and Ananti go up and down completely randomly.
Pair Corralation between LF and Ananti
Assuming the 90 days trading horizon LF Co is expected to under-perform the Ananti. But the stock apears to be less risky and, when comparing its historical volatility, LF Co is 1.06 times less risky than Ananti. The stock trades about -0.1 of its potential returns per unit of risk. The Ananti Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 498,500 in Ananti Inc on September 4, 2024 and sell it today you would earn a total of 29,500 from holding Ananti Inc or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LF Co vs. Ananti Inc
Performance |
| Timeline |
| LF Co |
| Ananti Inc |
LF and Ananti Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LF and Ananti
The main advantage of trading using opposite LF and Ananti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LF position performs unexpectedly, Ananti 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 Ananti will offset losses from the drop in Ananti's long position.The idea behind LF Co and Ananti Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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