Correlation Between Associated British and Lowland Investment
Can any of the company-specific risk be diversified away by investing in both Associated British and Lowland Investment 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 Associated British and Lowland Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Lowland Investment Co, you can compare the effects of market volatilities on Associated British and Lowland Investment 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 Associated British with a short position of Lowland Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Lowland Investment.
Diversification Opportunities for Associated British and Lowland Investment
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and Lowland is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Lowland Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowland Investment and Associated British 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 Associated British Foods are associated (or correlated) with Lowland Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowland Investment has no effect on the direction of Associated British i.e., Associated British and Lowland Investment go up and down completely randomly.
Pair Corralation between Associated British and Lowland Investment
Assuming the 90 days trading horizon Associated British Foods is expected to generate 1.15 times more return on investment than Lowland Investment. However, Associated British is 1.15 times more volatile than Lowland Investment Co. It trades about 0.06 of its potential returns per unit of risk. Lowland Investment Co is currently generating about 0.03 per unit of risk. If you would invest 158,227 in Associated British Foods on August 26, 2024 and sell it today you would earn a total of 61,473 from holding Associated British Foods or generate 38.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Lowland Investment Co
Performance |
| Timeline |
| Associated British Foods |
| Lowland Investment |
Associated British and Lowland Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Lowland Investment
The main advantage of trading using opposite Associated British and Lowland Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Lowland Investment 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 Lowland Investment will offset losses from the drop in Lowland Investment's long position.| Associated British vs. Ryanair Holdings plc | Associated British vs. Pets at Home | Associated British vs. Synthomer plc | Associated British vs. National Beverage Corp |
| Lowland Investment vs. Ryanair Holdings plc | Lowland Investment vs. Associated British Foods | Lowland Investment vs. Edita Food Industries | Lowland Investment vs. Premier Foods PLC |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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