Correlation Between Lake Materials and Amogreentech
Can any of the company-specific risk be diversified away by investing in both Lake Materials and Amogreentech 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 Amogreentech 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 Amogreentech Co, you can compare the effects of market volatilities on Lake Materials and Amogreentech 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 Amogreentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Amogreentech.
Diversification Opportunities for Lake Materials and Amogreentech
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Amogreentech is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Amogreentech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amogreentech 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 Amogreentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amogreentech has no effect on the direction of Lake Materials i.e., Lake Materials and Amogreentech go up and down completely randomly.
Pair Corralation between Lake Materials and Amogreentech
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 1.09 times more return on investment than Amogreentech. However, Lake Materials is 1.09 times more volatile than Amogreentech Co. It trades about -0.08 of its potential returns per unit of risk. Amogreentech Co is currently generating about -0.11 per unit of risk. If you would invest 1,947,000 in Lake Materials Co on August 29, 2024 and sell it today you would lose (678,000) from holding Lake Materials Co or give up 34.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Amogreentech Co
Performance |
| Timeline |
| Lake Materials |
| Amogreentech |
Lake Materials and Amogreentech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Amogreentech
The main advantage of trading using opposite Lake Materials and Amogreentech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, Amogreentech 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 Amogreentech will offset losses from the drop in Amogreentech'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 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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