Correlation Between National Retail and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both National Retail and Lion Biotechnologies 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 National Retail and Lion Biotechnologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and Lion Biotechnologies, you can compare the effects of market volatilities on National Retail and Lion Biotechnologies 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 National Retail with a short position of Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Lion Biotechnologies.
Diversification Opportunities for National Retail and Lion Biotechnologies
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Lion is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and National Retail 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 National Retail Properties are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of National Retail i.e., National Retail and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between National Retail and Lion Biotechnologies
Assuming the 90 days trading horizon National Retail is expected to generate 5.24 times less return on investment than Lion Biotechnologies. But when comparing it to its historical volatility, National Retail Properties is 5.71 times less risky than Lion Biotechnologies. It trades about 0.06 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 597.00 in Lion Biotechnologies on September 3, 2024 and sell it today you would earn a total of 269.00 from holding Lion Biotechnologies or generate 45.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Retail Properties vs. Lion Biotechnologies
Performance |
| Timeline |
| National Retail Prop |
| Lion Biotechnologies |
National Retail and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and Lion Biotechnologies
The main advantage of trading using opposite National Retail and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| National Retail vs. QBE Insurance Group | National Retail vs. United Natural Foods | National Retail vs. TYSON FOODS A | National Retail vs. Luckin Coffee |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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