Correlation Between Alumina Limited and LS Starrett
Can any of the company-specific risk be diversified away by investing in both Alumina Limited and LS Starrett 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 Alumina Limited and LS Starrett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alumina Limited PK and LS Starrett, you can compare the effects of market volatilities on Alumina Limited and LS Starrett 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 Alumina Limited with a short position of LS Starrett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumina Limited and LS Starrett.
Diversification Opportunities for Alumina Limited and LS Starrett
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alumina and SCX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited PK and LS Starrett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS Starrett and Alumina Limited 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 Alumina Limited PK are associated (or correlated) with LS Starrett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS Starrett has no effect on the direction of Alumina Limited i.e., Alumina Limited and LS Starrett go up and down completely randomly.
Pair Corralation between Alumina Limited and LS Starrett
If you would invest 1,250 in LS Starrett on August 28, 2024 and sell it today you would earn a total of 0.00 from holding LS Starrett or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alumina Limited PK vs. LS Starrett
Performance |
| Timeline |
| Alumina Limited PK |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LS Starrett |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Alumina Limited and LS Starrett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alumina Limited and LS Starrett
The main advantage of trading using opposite Alumina Limited and LS Starrett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumina Limited position performs unexpectedly, LS Starrett 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 LS Starrett will offset losses from the drop in LS Starrett's long position.| Alumina Limited vs. Anhui Conch Cement | Alumina Limited vs. Asahi Kaisei Corp | Alumina Limited vs. Covestro ADR |
| LS Starrett vs. Eastern Co | LS Starrett vs. Timken Company | LS Starrett vs. Lincoln Electric Holdings | LS Starrett vs. Hillman Solutions Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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