Correlation Between Innovative International and L Catterton
Can any of the company-specific risk be diversified away by investing in both Innovative International and L Catterton 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 Innovative International and L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovative International Acquisition and L Catterton Asia, you can compare the effects of market volatilities on Innovative International and L Catterton 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 Innovative International with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative International and L Catterton.
Diversification Opportunities for Innovative International and L Catterton
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Innovative and LCAAW is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Innovative International Acqui and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia and Innovative International 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 Innovative International Acquisition are associated (or correlated) with L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Innovative International i.e., Innovative International and L Catterton go up and down completely randomly.
Pair Corralation between Innovative International and L Catterton
Assuming the 90 days horizon Innovative International is expected to generate 4.8 times less return on investment than L Catterton. But when comparing it to its historical volatility, Innovative International Acquisition is 4.85 times less risky than L Catterton. It trades about 0.13 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.95 in L Catterton Asia on August 30, 2024 and sell it today you would earn a total of 48.05 from holding L Catterton Asia or generate 5057.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.98% |
| Values | Daily Returns |
Innovative International Acqui vs. L Catterton Asia
Performance |
| Timeline |
| Innovative International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Innovative International and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovative International and L Catterton
The main advantage of trading using opposite Innovative International and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative International position performs unexpectedly, L Catterton 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 L Catterton will offset losses from the drop in L Catterton's long position.The idea behind Innovative International Acquisition and L Catterton Asia 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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