Correlation Between LAKE MATERIALS and National Plastic
Can any of the company-specific risk be diversified away by investing in both LAKE MATERIALS and National Plastic 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 National Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAKE MATERIALS LTD and National Plastic Co, you can compare the effects of market volatilities on LAKE MATERIALS and National Plastic 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 National Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAKE MATERIALS and National Plastic.
Diversification Opportunities for LAKE MATERIALS and National Plastic
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between LAKE and National is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and National Plastic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Plastic 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 LTD are associated (or correlated) with National Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Plastic has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and National Plastic go up and down completely randomly.
Pair Corralation between LAKE MATERIALS and National Plastic
Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to generate 3.36 times more return on investment than National Plastic. However, LAKE MATERIALS is 3.36 times more volatile than National Plastic Co. It trades about 0.01 of its potential returns per unit of risk. National Plastic Co is currently generating about 0.0 per unit of risk. If you would invest 1,328,000 in LAKE MATERIALS LTD on September 4, 2024 and sell it today you would lose (172,000) from holding LAKE MATERIALS LTD or give up 12.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAKE MATERIALS LTD vs. National Plastic Co
Performance |
| Timeline |
| LAKE MATERIALS LTD |
| National Plastic |
LAKE MATERIALS and National Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAKE MATERIALS and National Plastic
The main advantage of trading using opposite LAKE MATERIALS and National Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAKE MATERIALS position performs unexpectedly, National Plastic 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 National Plastic will offset losses from the drop in National Plastic'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 |
| National Plastic vs. LG Uplus | National Plastic vs. ASTORY CoLtd | National Plastic vs. Industrial Bank | National Plastic vs. AnterogenCoLtd |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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