Correlation Between Lindeman Asia and Ni Steel
Can any of the company-specific risk be diversified away by investing in both Lindeman Asia and Ni Steel 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 Lindeman Asia and Ni Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindeman Asia Investment and Ni Steel, you can compare the effects of market volatilities on Lindeman Asia and Ni Steel 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 Lindeman Asia with a short position of Ni Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindeman Asia and Ni Steel.
Diversification Opportunities for Lindeman Asia and Ni Steel
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lindeman and 008260 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lindeman Asia Investment and Ni Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ni Steel and Lindeman Asia 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 Lindeman Asia Investment are associated (or correlated) with Ni Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ni Steel has no effect on the direction of Lindeman Asia i.e., Lindeman Asia and Ni Steel go up and down completely randomly.
Pair Corralation between Lindeman Asia and Ni Steel
Assuming the 90 days trading horizon Lindeman Asia Investment is expected to under-perform the Ni Steel. In addition to that, Lindeman Asia is 1.47 times more volatile than Ni Steel. It trades about -0.15 of its total potential returns per unit of risk. Ni Steel is currently generating about -0.05 per unit of volatility. If you would invest 435,500 in Ni Steel on August 27, 2024 and sell it today you would lose (45,000) from holding Ni Steel or give up 10.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindeman Asia Investment vs. Ni Steel
Performance |
| Timeline |
| Lindeman Asia Investment |
| Ni Steel |
Lindeman Asia and Ni Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindeman Asia and Ni Steel
The main advantage of trading using opposite Lindeman Asia and Ni Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindeman Asia position performs unexpectedly, Ni Steel 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 Ni Steel will offset losses from the drop in Ni Steel's long position.The idea behind Lindeman Asia Investment and Ni Steel 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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