Correlation Between Lion Metal and Fast Food
Can any of the company-specific risk be diversified away by investing in both Lion Metal and Fast Food 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 Lion Metal and Fast Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Metal Works and Fast Food Indonesia, you can compare the effects of market volatilities on Lion Metal and Fast Food 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 Lion Metal with a short position of Fast Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Fast Food.
Diversification Opportunities for Lion Metal and Fast Food
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lion and Fast is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Fast Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Food Indonesia and Lion Metal 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 Lion Metal Works are associated (or correlated) with Fast Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Food Indonesia has no effect on the direction of Lion Metal i.e., Lion Metal and Fast Food go up and down completely randomly.
Pair Corralation between Lion Metal and Fast Food
Assuming the 90 days trading horizon Lion Metal Works is expected to generate 1.65 times more return on investment than Fast Food. However, Lion Metal is 1.65 times more volatile than Fast Food Indonesia. It trades about -0.17 of its potential returns per unit of risk. Fast Food Indonesia is currently generating about -0.42 per unit of risk. If you would invest 38,000 in Lion Metal Works on September 1, 2024 and sell it today you would lose (7,200) from holding Lion Metal Works or give up 18.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Metal Works vs. Fast Food Indonesia
Performance |
| Timeline |
| Lion Metal Works |
| Fast Food Indonesia |
Lion Metal and Fast Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Metal and Fast Food
The main advantage of trading using opposite Lion Metal and Fast Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Metal position performs unexpectedly, Fast Food 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 Fast Food will offset losses from the drop in Fast Food's long position.| Lion Metal vs. Lionmesh Prima Tbk | Lion Metal vs. Pelangi Indah Canindo | Lion Metal vs. Indal Aluminium Industry | Lion Metal vs. Intanwijaya Internasional Tbk |
| Fast Food vs. Hero Supermarket Tbk | Fast Food vs. Indoritel Makmur Internasional | Fast Food vs. Enseval Putra Megatrading | Fast Food vs. Fks Multi Agro |
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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