Correlation Between L Catterton and Ross Acquisition
Can any of the company-specific risk be diversified away by investing in both L Catterton and Ross Acquisition 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 L Catterton and Ross Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L Catterton Asia and Ross Acquisition II, you can compare the effects of market volatilities on L Catterton and Ross Acquisition 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 L Catterton with a short position of Ross Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of L Catterton and Ross Acquisition.
Diversification Opportunities for L Catterton and Ross Acquisition
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LCAA and Ross is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding L Catterton Asia and Ross Acquisition II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Acquisition and L Catterton 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 L Catterton Asia are associated (or correlated) with Ross Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Acquisition has no effect on the direction of L Catterton i.e., L Catterton and Ross Acquisition go up and down completely randomly.
Pair Corralation between L Catterton and Ross Acquisition
Given the investment horizon of 90 days L Catterton is expected to generate 1.17 times less return on investment than Ross Acquisition. In addition to that, L Catterton is 1.33 times more volatile than Ross Acquisition II. It trades about 0.14 of its total potential returns per unit of risk. Ross Acquisition II is currently generating about 0.21 per unit of volatility. If you would invest 1,007 in Ross Acquisition II on September 3, 2024 and sell it today you would earn a total of 54.00 from holding Ross Acquisition II or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.35% |
| Values | Daily Returns |
L Catterton Asia vs. Ross Acquisition II
Performance |
| Timeline |
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ross Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
L Catterton and Ross Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L Catterton and Ross Acquisition
The main advantage of trading using opposite L Catterton and Ross Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L Catterton position performs unexpectedly, Ross Acquisition 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 Ross Acquisition will offset losses from the drop in Ross Acquisition's long position.The idea behind L Catterton Asia and Ross Acquisition II 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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