Correlation Between LPN Development and Modernform Group
Can any of the company-specific risk be diversified away by investing in both LPN Development and Modernform Group 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 Modernform Group 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 Modernform Group Public, you can compare the effects of market volatilities on LPN Development and Modernform Group 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 Modernform Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPN Development and Modernform Group.
Diversification Opportunities for LPN Development and Modernform Group
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LPN and Modernform is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LPN Development Public and Modernform Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modernform Group Public 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 Modernform Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modernform Group Public has no effect on the direction of LPN Development i.e., LPN Development and Modernform Group go up and down completely randomly.
Pair Corralation between LPN Development and Modernform Group
Assuming the 90 days trading horizon LPN Development is expected to generate 1.04 times less return on investment than Modernform Group. But when comparing it to its historical volatility, LPN Development Public is 1.01 times less risky than Modernform Group. It trades about 0.04 of its potential returns per unit of risk. Modernform Group Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 310.00 in Modernform Group Public on September 3, 2024 and sell it today you would lose (52.00) from holding Modernform Group Public or give up 16.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.55% |
| Values | Daily Returns |
LPN Development Public vs. Modernform Group Public
Performance |
| Timeline |
| LPN Development Public |
| Modernform Group Public |
LPN Development and Modernform Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPN Development and Modernform Group
The main advantage of trading using opposite LPN Development and Modernform Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPN Development position performs unexpectedly, Modernform Group 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 Modernform Group will offset losses from the drop in Modernform Group's 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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