Correlation Between Leading Edge and Mason Graphite
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Mason Graphite 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 Leading Edge and Mason Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and Mason Graphite, you can compare the effects of market volatilities on Leading Edge and Mason Graphite 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 Leading Edge with a short position of Mason Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Mason Graphite.
Diversification Opportunities for Leading Edge and Mason Graphite
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leading and Mason is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Mason Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mason Graphite and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Mason Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mason Graphite has no effect on the direction of Leading Edge i.e., Leading Edge and Mason Graphite go up and down completely randomly.
Pair Corralation between Leading Edge and Mason Graphite
Assuming the 90 days horizon Leading Edge Materials is expected to generate 0.94 times more return on investment than Mason Graphite. However, Leading Edge Materials is 1.06 times less risky than Mason Graphite. It trades about -0.03 of its potential returns per unit of risk. Mason Graphite is currently generating about -0.28 per unit of risk. If you would invest 7.10 in Leading Edge Materials on September 1, 2024 and sell it today you would lose (0.40) from holding Leading Edge Materials or give up 5.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leading Edge Materials vs. Mason Graphite
Performance |
| Timeline |
| Leading Edge Materials |
| Mason Graphite |
Leading Edge and Mason Graphite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and Mason Graphite
The main advantage of trading using opposite Leading Edge and Mason Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Mason Graphite 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 Mason Graphite will offset losses from the drop in Mason Graphite's long position.| Leading Edge vs. South32 Limited | Leading Edge vs. NioCorp Developments Ltd | Leading Edge vs. HUMANA INC | Leading Edge vs. SCOR PK |
| Mason Graphite vs. Northern Graphite | Mason Graphite vs. Graphite One | Mason Graphite vs. Lomiko Metals | Mason Graphite vs. IGO Limited |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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