Correlation Between Gamma Communications and London Security
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and London Security 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 Gamma Communications and London Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and London Security Plc, you can compare the effects of market volatilities on Gamma Communications and London Security 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 Gamma Communications with a short position of London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and London Security.
Diversification Opportunities for Gamma Communications and London Security
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Gamma and London is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and Gamma 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 Gamma Communications PLC are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Gamma Communications i.e., Gamma Communications and London Security go up and down completely randomly.
Pair Corralation between Gamma Communications and London Security
Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 1.39 times more return on investment than London Security. However, Gamma Communications is 1.39 times more volatile than London Security Plc. It trades about 0.09 of its potential returns per unit of risk. London Security Plc is currently generating about 0.05 per unit of risk. If you would invest 123,945 in Gamma Communications PLC on September 1, 2024 and sell it today you would earn a total of 34,055 from holding Gamma Communications PLC or generate 27.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. London Security Plc
Performance |
| Timeline |
| Gamma Communications PLC |
| London Security Plc |
Gamma Communications and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and London Security
The main advantage of trading using opposite Gamma Communications and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Gamma Communications vs. Sabien Technology Group | Gamma Communications vs. DFS Furniture PLC | Gamma Communications vs. Monster Beverage Corp | Gamma Communications vs. Auction Technology Group |
| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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