Correlation Between LBG Media and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both LBG Media and Virgin Wines 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 LBG Media and Virgin Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LBG Media PLC and Virgin Wines UK, you can compare the effects of market volatilities on LBG Media and Virgin Wines 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 LBG Media with a short position of Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of LBG Media and Virgin Wines.
Diversification Opportunities for LBG Media and Virgin Wines
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LBG and Virgin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LBG Media PLC and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK and LBG Media 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 LBG Media PLC are associated (or correlated) with Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of LBG Media i.e., LBG Media and Virgin Wines go up and down completely randomly.
Pair Corralation between LBG Media and Virgin Wines
Assuming the 90 days trading horizon LBG Media PLC is expected to generate 1.46 times more return on investment than Virgin Wines. However, LBG Media is 1.46 times more volatile than Virgin Wines UK. It trades about 0.19 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.07 per unit of risk. If you would invest 11,800 in LBG Media PLC on October 11, 2024 and sell it today you would earn a total of 1,200 from holding LBG Media PLC or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
LBG Media PLC vs. Virgin Wines UK
Performance |
| Timeline |
| LBG Media PLC |
| Virgin Wines UK |
LBG Media and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LBG Media and Virgin Wines
The main advantage of trading using opposite LBG Media and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBG Media position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' long position.| LBG Media vs. Rheinmetall AG | LBG Media vs. BE Semiconductor Industries | LBG Media vs. EVS Broadcast Equipment | LBG Media vs. Golden Metal Resources |
| Virgin Wines vs. Live Nation Entertainment | Virgin Wines vs. Arrow Electronics | Virgin Wines vs. LBG Media PLC | Virgin Wines vs. JD Sports Fashion |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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