Correlation Between Carabao Group and Lam Soon
Can any of the company-specific risk be diversified away by investing in both Carabao Group and Lam Soon 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 Carabao Group and Lam Soon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carabao Group Public and Lam Soon Public, you can compare the effects of market volatilities on Carabao Group and Lam Soon 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 Carabao Group with a short position of Lam Soon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carabao Group and Lam Soon.
Diversification Opportunities for Carabao Group and Lam Soon
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carabao and Lam is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Lam Soon Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Soon Public and Carabao Group 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 Carabao Group Public are associated (or correlated) with Lam Soon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Soon Public has no effect on the direction of Carabao Group i.e., Carabao Group and Lam Soon go up and down completely randomly.
Pair Corralation between Carabao Group and Lam Soon
Assuming the 90 days trading horizon Carabao Group is expected to generate 51.11 times less return on investment than Lam Soon. But when comparing it to its historical volatility, Carabao Group Public is 71.25 times less risky than Lam Soon. It trades about 0.16 of its potential returns per unit of risk. Lam Soon Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 482.00 in Lam Soon Public on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Lam Soon Public or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carabao Group Public vs. Lam Soon Public
Performance |
| Timeline |
| Carabao Group Public |
| Lam Soon Public |
Carabao Group and Lam Soon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carabao Group and Lam Soon
The main advantage of trading using opposite Carabao Group and Lam Soon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carabao Group position performs unexpectedly, Lam Soon 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 Lam Soon will offset losses from the drop in Lam Soon's long position.The idea behind Carabao Group Public and Lam Soon 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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