Correlation Between LB Investment and RF Materials
Can any of the company-specific risk be diversified away by investing in both LB Investment and RF Materials 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 LB Investment and RF Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Investment and RF Materials Co, you can compare the effects of market volatilities on LB Investment and RF Materials 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 LB Investment with a short position of RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Investment and RF Materials.
Diversification Opportunities for LB Investment and RF Materials
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 309960 and 327260 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials and LB Investment 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 LB Investment are associated (or correlated) with RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of LB Investment i.e., LB Investment and RF Materials go up and down completely randomly.
Pair Corralation between LB Investment and RF Materials
Assuming the 90 days trading horizon LB Investment is expected to under-perform the RF Materials. But the stock apears to be less risky and, when comparing its historical volatility, LB Investment is 1.06 times less risky than RF Materials. The stock trades about -0.26 of its potential returns per unit of risk. The RF Materials Co is currently generating about 0.65 of returns per unit of risk over similar time horizon. If you would invest 498,500 in RF Materials Co on November 7, 2024 and sell it today you would earn a total of 73,500 from holding RF Materials Co or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Investment vs. RF Materials Co
Performance |
| Timeline |
| LB Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| RF Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
LB Investment and RF Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Investment and RF Materials
The main advantage of trading using opposite LB Investment and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Investment position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.| LB Investment vs. Korea Information Communications | LB Investment vs. Digital Imaging Technology | LB Investment vs. Puloon Technology | LB Investment vs. Shinhan Inverse Copper |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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