Correlation Between Bilfinger and Larsen Toubro
Can any of the company-specific risk be diversified away by investing in both Bilfinger and Larsen Toubro 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 Bilfinger and Larsen Toubro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bilfinger SE and Larsen Toubro Limited, you can compare the effects of market volatilities on Bilfinger and Larsen Toubro 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 Bilfinger with a short position of Larsen Toubro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bilfinger and Larsen Toubro.
Diversification Opportunities for Bilfinger and Larsen Toubro
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bilfinger and Larsen is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bilfinger SE and Larsen Toubro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larsen Toubro Limited and Bilfinger 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 Bilfinger SE are associated (or correlated) with Larsen Toubro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larsen Toubro Limited has no effect on the direction of Bilfinger i.e., Bilfinger and Larsen Toubro go up and down completely randomly.
Pair Corralation between Bilfinger and Larsen Toubro
Assuming the 90 days trading horizon Bilfinger is expected to generate 1.94 times less return on investment than Larsen Toubro. But when comparing it to its historical volatility, Bilfinger SE is 1.53 times less risky than Larsen Toubro. It trades about 0.14 of its potential returns per unit of risk. Larsen Toubro Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,940 in Larsen Toubro Limited on September 13, 2024 and sell it today you would earn a total of 400.00 from holding Larsen Toubro Limited or generate 10.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bilfinger SE vs. Larsen Toubro Limited
Performance |
| Timeline |
| Bilfinger SE |
| Larsen Toubro Limited |
Bilfinger and Larsen Toubro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bilfinger and Larsen Toubro
The main advantage of trading using opposite Bilfinger and Larsen Toubro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bilfinger position performs unexpectedly, Larsen Toubro 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 Larsen Toubro will offset losses from the drop in Larsen Toubro's long position.| Bilfinger vs. Sumitomo Rubber Industries | Bilfinger vs. Summit Materials | Bilfinger vs. Eagle Materials | Bilfinger vs. Mitsubishi Materials |
| Larsen Toubro vs. Ross Stores | Larsen Toubro vs. AEGEAN AIRLINES | Larsen Toubro vs. RETAIL FOOD GROUP | Larsen Toubro vs. Southwest Airlines Co |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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