Correlation Between Consolidated Communications and AJ LUCAS
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications and AJ LUCAS 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 Consolidated Communications and AJ LUCAS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and AJ LUCAS GROUP, you can compare the effects of market volatilities on Consolidated Communications and AJ LUCAS 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 Consolidated Communications with a short position of AJ LUCAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and AJ LUCAS.
Diversification Opportunities for Consolidated Communications and AJ LUCAS
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Consolidated and FW9 is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and AJ LUCAS GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ LUCAS GROUP and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with AJ LUCAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ LUCAS GROUP has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and AJ LUCAS go up and down completely randomly.
Pair Corralation between Consolidated Communications and AJ LUCAS
Assuming the 90 days horizon Consolidated Communications is expected to generate 24.01 times less return on investment than AJ LUCAS. But when comparing it to its historical volatility, Consolidated Communications Holdings is 40.13 times less risky than AJ LUCAS. It trades about 0.15 of its potential returns per unit of risk. AJ LUCAS GROUP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.10 in AJ LUCAS GROUP on October 15, 2024 and sell it today you would lose (0.05) from holding AJ LUCAS GROUP or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.33% |
| Values | Daily Returns |
Consolidated Communications Ho vs. AJ LUCAS GROUP
Performance |
| Timeline |
| Consolidated Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| AJ LUCAS GROUP |
Consolidated Communications and AJ LUCAS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Communications and AJ LUCAS
The main advantage of trading using opposite Consolidated Communications and AJ LUCAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications position performs unexpectedly, AJ LUCAS 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 AJ LUCAS will offset losses from the drop in AJ LUCAS's long position.The idea behind Consolidated Communications Holdings and AJ LUCAS GROUP 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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