Correlation Between Advanced Info and LPN Development

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Can any of the company-specific risk be diversified away by investing in both Advanced Info and LPN Development 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 Advanced Info and LPN Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Info Service and LPN Development Public, you can compare the effects of market volatilities on Advanced Info and LPN Development 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 Advanced Info with a short position of LPN Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Info and LPN Development.

Diversification Opportunities for Advanced Info and LPN Development

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Advanced and LPN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and LPN Development Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPN Development Public and Advanced Info 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 Advanced Info Service are associated (or correlated) with LPN Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPN Development Public has no effect on the direction of Advanced Info i.e., Advanced Info and LPN Development go up and down completely randomly.

Pair Corralation between Advanced Info and LPN Development

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 1.41 times more return on investment than LPN Development. However, Advanced Info is 1.41 times more volatile than LPN Development Public. It trades about 0.08 of its potential returns per unit of risk. LPN Development Public is currently generating about 0.06 per unit of risk. If you would invest  22,216  in Advanced Info Service on August 29, 2024 and sell it today you would earn a total of  6,684  from holding Advanced Info Service or generate 30.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.58%
ValuesDaily Returns

Advanced Info Service  vs.  LPN Development Public

 Performance 
       Timeline  
Advanced Info Service 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Advanced Info sustained solid returns over the last few months and may actually be approaching a breakup point.
LPN Development Public 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in LPN Development Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, LPN Development disclosed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Info and LPN Development Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advanced Info and LPN Development

The main advantage of trading using opposite Advanced Info and LPN Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Info position performs unexpectedly, LPN Development 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 LPN Development will offset losses from the drop in LPN Development's long position.
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The idea behind Advanced Info Service and LPN Development Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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