Correlation Between Lake Materials and Elentec Co
Can any of the company-specific risk be diversified away by investing in both Lake Materials and Elentec 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 Lake Materials and Elentec Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Materials Co and Elentec Co, you can compare the effects of market volatilities on Lake Materials and Elentec 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 Lake Materials with a short position of Elentec Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Elentec Co.
Diversification Opportunities for Lake Materials and Elentec Co
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lake and Elentec is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Elentec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elentec Co and Lake Materials 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 Lake Materials Co are associated (or correlated) with Elentec Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elentec Co has no effect on the direction of Lake Materials i.e., Lake Materials and Elentec Co go up and down completely randomly.
Pair Corralation between Lake Materials and Elentec Co
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 1.63 times more return on investment than Elentec Co. However, Lake Materials is 1.63 times more volatile than Elentec Co. It trades about 0.06 of its potential returns per unit of risk. Elentec Co is currently generating about -0.04 per unit of risk. If you would invest 456,500 in Lake Materials Co on September 13, 2024 and sell it today you would earn a total of 650,500 from holding Lake Materials Co or generate 142.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Elentec Co
Performance |
| Timeline |
| Lake Materials |
| Elentec Co |
Lake Materials and Elentec Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Elentec Co
The main advantage of trading using opposite Lake Materials and Elentec Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, Elentec 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 Elentec Co will offset losses from the drop in Elentec Co's long position.| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials vs. SK Hynix |
| Elentec Co vs. Lake Materials Co | Elentec Co vs. CJ Seafood Corp | Elentec Co vs. Sewoon Medical Co | Elentec Co vs. Iljin Materials 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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