Correlation Between Astar and LGI
Can any of the company-specific risk be diversified away by investing in both Astar and LGI 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 Astar and LGI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and LGI, you can compare the effects of market volatilities on Astar and LGI 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 Astar with a short position of LGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and LGI.
Diversification Opportunities for Astar and LGI
Very weak diversification
The 3 months correlation between Astar and LGI is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Astar and LGI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI and Astar 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 Astar are associated (or correlated) with LGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI has no effect on the direction of Astar i.e., Astar and LGI go up and down completely randomly.
Pair Corralation between Astar and LGI
Assuming the 90 days trading horizon Astar is expected to generate 2.36 times more return on investment than LGI. However, Astar is 2.36 times more volatile than LGI. It trades about 0.0 of its potential returns per unit of risk. LGI is currently generating about -0.01 per unit of risk. If you would invest 7.31 in Astar on October 18, 2024 and sell it today you would lose (1.05) from holding Astar or give up 14.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.66% |
| Values | Daily Returns |
Astar vs. LGI
Performance |
| Timeline |
| Astar |
| LGI |
Astar and LGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astar and LGI
The main advantage of trading using opposite Astar and LGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar position performs unexpectedly, LGI 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 LGI will offset losses from the drop in LGI's long position.The idea behind Astar and LGI 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.| LGI vs. Aneka Tambang Tbk | LGI vs. Commonwealth Bank | LGI vs. Commonwealth Bank of | LGI vs. Australia and New |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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