Correlation Between LF and InBody CoLtd
Can any of the company-specific risk be diversified away by investing in both LF and InBody CoLtd 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 InBody CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LF Co and InBody CoLtd, you can compare the effects of market volatilities on LF and InBody CoLtd 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 InBody CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of LF and InBody CoLtd.
Diversification Opportunities for LF and InBody CoLtd
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LF and InBody is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LF Co and InBody CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBody CoLtd 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 InBody CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBody CoLtd has no effect on the direction of LF i.e., LF and InBody CoLtd go up and down completely randomly.
Pair Corralation between LF and InBody CoLtd
Assuming the 90 days trading horizon LF Co is expected to under-perform the InBody CoLtd. In addition to that, LF is 2.11 times more volatile than InBody CoLtd. It trades about -0.1 of its total potential returns per unit of risk. InBody CoLtd is currently generating about -0.18 per unit of volatility. If you would invest 2,445,000 in InBody CoLtd on September 4, 2024 and sell it today you would lose (220,000) from holding InBody CoLtd or give up 9.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LF Co vs. InBody CoLtd
Performance |
| Timeline |
| LF Co |
| InBody CoLtd |
LF and InBody CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LF and InBody CoLtd
The main advantage of trading using opposite LF and InBody CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LF position performs unexpectedly, InBody CoLtd 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 InBody CoLtd will offset losses from the drop in InBody CoLtd's long position.The idea behind LF Co and InBody CoLtd 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.| InBody CoLtd vs. Vieworks Co | InBody CoLtd vs. Genie Music | InBody CoLtd vs. Seegene | InBody CoLtd vs. Medy Tox |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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