Correlation Between Lake Materials and PI Advanced
Can any of the company-specific risk be diversified away by investing in both Lake Materials and PI Advanced 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 PI Advanced 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 PI Advanced Materials, you can compare the effects of market volatilities on Lake Materials and PI Advanced 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 PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and PI Advanced.
Diversification Opportunities for Lake Materials and PI Advanced
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lake and 178920 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Lake Materials i.e., Lake Materials and PI Advanced go up and down completely randomly.
Pair Corralation between Lake Materials and PI Advanced
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 0.88 times more return on investment than PI Advanced. However, Lake Materials Co is 1.14 times less risky than PI Advanced. It trades about -0.19 of its potential returns per unit of risk. PI Advanced Materials is currently generating about -0.2 per unit of risk. If you would invest 1,784,000 in Lake Materials Co on August 31, 2024 and sell it today you would lose (546,000) from holding Lake Materials Co or give up 30.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. PI Advanced Materials
Performance |
| Timeline |
| Lake Materials |
| PI Advanced Materials |
Lake Materials and PI Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and PI Advanced
The main advantage of trading using opposite Lake Materials and PI Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, PI Advanced 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 PI Advanced will offset losses from the drop in PI Advanced's long position.| Lake Materials vs. LG Electronics Pfd | Lake Materials vs. Sungmoon Electronics Co | Lake Materials vs. Shinsegae Information Communication | Lake Materials vs. Shinil Electronics Co |
| PI Advanced vs. Iljin Materials Co | PI Advanced vs. Union Materials Corp | PI Advanced vs. Playgram Co | PI Advanced vs. National Plastic 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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