Correlation Between BBC and LAKE MATERIALS
Can any of the company-specific risk be diversified away by investing in both BBC and LAKE 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 BBC and LAKE MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBC Co and LAKE MATERIALS LTD, you can compare the effects of market volatilities on BBC and LAKE 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 BBC with a short position of LAKE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBC and LAKE MATERIALS.
Diversification Opportunities for BBC and LAKE MATERIALS
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BBC and LAKE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BBC Co and LAKE MATERIALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAKE MATERIALS LTD and BBC 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 BBC Co are associated (or correlated) with LAKE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAKE MATERIALS LTD has no effect on the direction of BBC i.e., BBC and LAKE MATERIALS go up and down completely randomly.
Pair Corralation between BBC and LAKE MATERIALS
Assuming the 90 days trading horizon BBC Co is expected to generate 0.55 times more return on investment than LAKE MATERIALS. However, BBC Co is 1.81 times less risky than LAKE MATERIALS. It trades about 0.02 of its potential returns per unit of risk. LAKE MATERIALS LTD is currently generating about -0.01 per unit of risk. If you would invest 784,000 in BBC Co on September 18, 2024 and sell it today you would earn a total of 3,000 from holding BBC Co or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
BBC Co vs. LAKE MATERIALS LTD
Performance |
| Timeline |
| BBC Co |
| LAKE MATERIALS LTD |
BBC and LAKE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBC and LAKE MATERIALS
The main advantage of trading using opposite BBC and LAKE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBC position performs unexpectedly, LAKE 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 LAKE MATERIALS will offset losses from the drop in LAKE MATERIALS's long position.| BBC vs. LAKE MATERIALS LTD | BBC vs. WONIK Materials CoLtd | BBC vs. EBEST Investment Securities | BBC vs. NH Investment Securities |
| LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. LG Energy Solution | LAKE MATERIALS vs. SK Hynix |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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