Correlation Between Basic Energy and LFM Properties
Can any of the company-specific risk be diversified away by investing in both Basic Energy and LFM Properties 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 Basic Energy and LFM Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Energy Corp and LFM Properties Corp, you can compare the effects of market volatilities on Basic Energy and LFM Properties 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 Basic Energy with a short position of LFM Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Energy and LFM Properties.
Diversification Opportunities for Basic Energy and LFM Properties
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Basic and LFM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Basic Energy Corp and LFM Properties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LFM Properties Corp and Basic Energy 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 Basic Energy Corp are associated (or correlated) with LFM Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LFM Properties Corp has no effect on the direction of Basic Energy i.e., Basic Energy and LFM Properties go up and down completely randomly.
Pair Corralation between Basic Energy and LFM Properties
Assuming the 90 days trading horizon Basic Energy Corp is expected to under-perform the LFM Properties. But the stock apears to be less risky and, when comparing its historical volatility, Basic Energy Corp is 5.13 times less risky than LFM Properties. The stock trades about -0.06 of its potential returns per unit of risk. The LFM Properties Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8.70 in LFM Properties Corp on September 1, 2024 and sell it today you would lose (3.60) from holding LFM Properties Corp or give up 41.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 59.2% |
| Values | Daily Returns |
Basic Energy Corp vs. LFM Properties Corp
Performance |
| Timeline |
| Basic Energy Corp |
| LFM Properties Corp |
Basic Energy and LFM Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Energy and LFM Properties
The main advantage of trading using opposite Basic Energy and LFM Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Energy position performs unexpectedly, LFM Properties 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 LFM Properties will offset losses from the drop in LFM Properties' long position.The idea behind Basic Energy Corp and LFM Properties Corp 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.| LFM Properties vs. Concepcion Industrial Corp | LFM Properties vs. Apex Mining Co | LFM Properties vs. Metropolitan Bank Trust | LFM Properties vs. Philex Mining 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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