Correlation Between LAKE MATERIALS and Wave Electronics
Can any of the company-specific risk be diversified away by investing in both LAKE MATERIALS and Wave Electronics 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 Wave Electronics 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 Wave Electronics Co, you can compare the effects of market volatilities on LAKE MATERIALS and Wave Electronics 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 Wave Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAKE MATERIALS and Wave Electronics.
Diversification Opportunities for LAKE MATERIALS and Wave Electronics
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LAKE and Wave is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics 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 Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and Wave Electronics go up and down completely randomly.
Pair Corralation between LAKE MATERIALS and Wave Electronics
Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to generate 3.94 times more return on investment than Wave Electronics. However, LAKE MATERIALS is 3.94 times more volatile than Wave Electronics Co. It trades about -0.01 of its potential returns per unit of risk. Wave Electronics Co is currently generating about -0.32 per unit of risk. If you would invest 1,169,000 in LAKE MATERIALS LTD on November 4, 2024 and sell it today you would lose (13,000) from holding LAKE MATERIALS LTD or give up 1.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAKE MATERIALS LTD vs. Wave Electronics Co
Performance |
| Timeline |
| LAKE MATERIALS LTD |
| Wave Electronics |
LAKE MATERIALS and Wave Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAKE MATERIALS and Wave Electronics
The main advantage of trading using opposite LAKE MATERIALS and Wave Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAKE MATERIALS position performs unexpectedly, Wave Electronics 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 Wave Electronics will offset losses from the drop in Wave Electronics' long position.| LAKE MATERIALS vs. Lotte Data Communication | LAKE MATERIALS vs. Samyang Foods Co | LAKE MATERIALS vs. Heungkuk Metaltech CoLtd | LAKE MATERIALS vs. Seoyon Topmetal Co |
| Wave Electronics vs. EBEST Investment Securities | Wave Electronics vs. Daelim Trading Co | Wave Electronics vs. Daiyang Metal Co | Wave Electronics vs. PJ Metal 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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