Correlation Between Lake Materials and Innometry
Can any of the company-specific risk be diversified away by investing in both Lake Materials and Innometry 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 Innometry 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 Innometry Co, you can compare the effects of market volatilities on Lake Materials and Innometry 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 Innometry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Innometry.
Diversification Opportunities for Lake Materials and Innometry
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Innometry is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Innometry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innometry 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 Innometry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innometry has no effect on the direction of Lake Materials i.e., Lake Materials and Innometry go up and down completely randomly.
Pair Corralation between Lake Materials and Innometry
Assuming the 90 days trading horizon Lake Materials Co is expected to generate 1.39 times more return on investment than Innometry. However, Lake Materials is 1.39 times more volatile than Innometry Co. It trades about -0.01 of its potential returns per unit of risk. Innometry Co is currently generating about -0.03 per unit of risk. If you would invest 1,646,000 in Lake Materials Co on November 3, 2024 and sell it today you would lose (490,000) from holding Lake Materials Co or give up 29.77% 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. Innometry Co
Performance |
| Timeline |
| Lake Materials |
| Innometry |
Lake Materials and Innometry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Innometry
The main advantage of trading using opposite Lake Materials and Innometry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, Innometry 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 Innometry will offset losses from the drop in Innometry's long position.| Lake Materials vs. Puloon Technology | Lake Materials vs. CKH Food Health | Lake Materials vs. FNSTech Co | Lake Materials vs. Samlip General Foods |
| Innometry vs. Hanjoo Light Metal | Innometry vs. Dongbang Transport Logistics | Innometry vs. Hannong Chemicals | Innometry vs. ECSTELECOM 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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