Correlation Between Gamma Communications and LyondellBasell Industries
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and LyondellBasell Industries 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 Gamma Communications and LyondellBasell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and LyondellBasell Industries NV, you can compare the effects of market volatilities on Gamma Communications and LyondellBasell Industries 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 Gamma Communications with a short position of LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and LyondellBasell Industries.
Diversification Opportunities for Gamma Communications and LyondellBasell Industries
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gamma and LyondellBasell is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries and Gamma Communications 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 Gamma Communications plc are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of Gamma Communications i.e., Gamma Communications and LyondellBasell Industries go up and down completely randomly.
Pair Corralation between Gamma Communications and LyondellBasell Industries
Assuming the 90 days horizon Gamma Communications plc is expected to generate 0.85 times more return on investment than LyondellBasell Industries. However, Gamma Communications plc is 1.17 times less risky than LyondellBasell Industries. It trades about 0.03 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.18 per unit of risk. If you would invest 1,930 in Gamma Communications plc on September 13, 2024 and sell it today you would earn a total of 30.00 from holding Gamma Communications plc or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. LyondellBasell Industries NV
Performance |
| Timeline |
| Gamma Communications plc |
| LyondellBasell Industries |
Gamma Communications and LyondellBasell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and LyondellBasell Industries
The main advantage of trading using opposite Gamma Communications and LyondellBasell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, LyondellBasell Industries 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 LyondellBasell Industries will offset losses from the drop in LyondellBasell Industries' long position.| Gamma Communications vs. Lamar Advertising | Gamma Communications vs. CARSALESCOM | Gamma Communications vs. Ribbon Communications | Gamma Communications vs. Charter Communications |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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