Correlation Between Ecopro BM and LF
Can any of the company-specific risk be diversified away by investing in both Ecopro BM 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 Ecopro BM and LF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopro BM Co and LF Co, you can compare the effects of market volatilities on Ecopro BM 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 Ecopro BM with a short position of LF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopro BM and LF.
Diversification Opportunities for Ecopro BM and LF
Modest diversification
The 3 months correlation between Ecopro and LF is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ecopro BM Co and LF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF Co and Ecopro BM 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 Ecopro BM Co 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 Ecopro BM i.e., Ecopro BM and LF go up and down completely randomly.
Pair Corralation between Ecopro BM and LF
Assuming the 90 days trading horizon Ecopro BM Co is expected to under-perform the LF. But the stock apears to be less risky and, when comparing its historical volatility, Ecopro BM Co is 1.08 times less risky than LF. The stock trades about -0.21 of its potential returns per unit of risk. The LF Co is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 11,810,000 in LF Co on September 1, 2024 and sell it today you would lose (1,980,000) from holding LF Co or give up 16.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopro BM Co vs. LF Co
Performance |
| Timeline |
| Ecopro BM |
| LF Co |
Ecopro BM and LF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopro BM and LF
The main advantage of trading using opposite Ecopro BM and LF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopro BM 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.The idea behind Ecopro BM Co and LF Co 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.| 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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