Correlation Between H B and Lightwave Logic
Can any of the company-specific risk be diversified away by investing in both H B and Lightwave Logic 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 H B and Lightwave Logic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H B Fuller and Lightwave Logic, you can compare the effects of market volatilities on H B and Lightwave Logic 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 H B with a short position of Lightwave Logic. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and Lightwave Logic.
Diversification Opportunities for H B and Lightwave Logic
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FUL and Lightwave is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Lightwave Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightwave Logic and H B 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 H B Fuller are associated (or correlated) with Lightwave Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightwave Logic has no effect on the direction of H B i.e., H B and Lightwave Logic go up and down completely randomly.
Pair Corralation between H B and Lightwave Logic
Considering the 90-day investment horizon H B Fuller is expected to generate 0.3 times more return on investment than Lightwave Logic. However, H B Fuller is 3.28 times less risky than Lightwave Logic. It trades about 0.04 of its potential returns per unit of risk. Lightwave Logic is currently generating about -0.11 per unit of risk. If you would invest 7,534 in H B Fuller on August 27, 2024 and sell it today you would earn a total of 82.00 from holding H B Fuller or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H B Fuller vs. Lightwave Logic
Performance |
| Timeline |
| H B Fuller |
| Lightwave Logic |
H B and Lightwave Logic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H B and Lightwave Logic
The main advantage of trading using opposite H B and Lightwave Logic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H B position performs unexpectedly, Lightwave Logic 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 Lightwave Logic will offset losses from the drop in Lightwave Logic's long position.The idea behind H B Fuller and Lightwave Logic 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.| Lightwave Logic vs. H B Fuller | Lightwave Logic vs. Element Solutions | Lightwave Logic vs. Innospec | Lightwave Logic vs. Cabot |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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