Correlation Between LPN Development and Laguna Resorts
Can any of the company-specific risk be diversified away by investing in both LPN Development and Laguna Resorts 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 LPN Development and Laguna Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPN Development Public and Laguna Resorts Hotels, you can compare the effects of market volatilities on LPN Development and Laguna Resorts 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 LPN Development with a short position of Laguna Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPN Development and Laguna Resorts.
Diversification Opportunities for LPN Development and Laguna Resorts
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LPN and Laguna is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding LPN Development Public and Laguna Resorts Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laguna Resorts Hotels and LPN Development 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 LPN Development Public are associated (or correlated) with Laguna Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laguna Resorts Hotels has no effect on the direction of LPN Development i.e., LPN Development and Laguna Resorts go up and down completely randomly.
Pair Corralation between LPN Development and Laguna Resorts
Assuming the 90 days trading horizon LPN Development is expected to generate 1.0 times less return on investment than Laguna Resorts. But when comparing it to its historical volatility, LPN Development Public is 1.0 times less risky than Laguna Resorts. It trades about 0.08 of its potential returns per unit of risk. Laguna Resorts Hotels is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,500 in Laguna Resorts Hotels on September 3, 2024 and sell it today you would lose (600.00) from holding Laguna Resorts Hotels or give up 13.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPN Development Public vs. Laguna Resorts Hotels
Performance |
| Timeline |
| LPN Development Public |
| Laguna Resorts Hotels |
LPN Development and Laguna Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPN Development and Laguna Resorts
The main advantage of trading using opposite LPN Development and Laguna Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPN Development position performs unexpectedly, Laguna Resorts 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 Laguna Resorts will offset losses from the drop in Laguna Resorts' long position.| LPN Development vs. Land and Houses | LPN Development vs. Quality Houses Public | LPN Development vs. AP Public | LPN Development vs. SCB X Public |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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