Correlation Between Leons Furniture and Guru Organic
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Guru Organic 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 Leons Furniture and Guru Organic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Guru Organic Energy, you can compare the effects of market volatilities on Leons Furniture and Guru Organic 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 Leons Furniture with a short position of Guru Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Guru Organic.
Diversification Opportunities for Leons Furniture and Guru Organic
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leons and Guru is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of Leons Furniture i.e., Leons Furniture and Guru Organic go up and down completely randomly.
Pair Corralation between Leons Furniture and Guru Organic
Assuming the 90 days trading horizon Leons Furniture Limited is expected to generate 0.7 times more return on investment than Guru Organic. However, Leons Furniture Limited is 1.44 times less risky than Guru Organic. It trades about 0.1 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.03 per unit of risk. If you would invest 1,750 in Leons Furniture Limited on August 24, 2024 and sell it today you would earn a total of 928.00 from holding Leons Furniture Limited or generate 53.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Guru Organic Energy
Performance |
| Timeline |
| Leons Furniture |
| Guru Organic Energy |
Leons Furniture and Guru Organic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Guru Organic
The main advantage of trading using opposite Leons Furniture and Guru Organic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Guru Organic 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 Guru Organic will offset losses from the drop in Guru Organic's long position.| Leons Furniture vs. Restaurant Brands International | Leons Furniture vs. Enghouse Systems | Leons Furniture vs. Metro Inc | Leons Furniture vs. goeasy |
| Guru Organic vs. Leons Furniture Limited | Guru Organic vs. Autocanada | Guru Organic vs. Exco Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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