Correlation Between Lachlan Star and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Lachlan Star and Collins Foods 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 Lachlan Star and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lachlan Star and Collins Foods, you can compare the effects of market volatilities on Lachlan Star and Collins Foods 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 Lachlan Star with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lachlan Star and Collins Foods.
Diversification Opportunities for Lachlan Star and Collins Foods
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lachlan and Collins is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lachlan Star and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Lachlan Star 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 Lachlan Star are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Lachlan Star i.e., Lachlan Star and Collins Foods go up and down completely randomly.
Pair Corralation between Lachlan Star and Collins Foods
Assuming the 90 days trading horizon Lachlan Star is expected to under-perform the Collins Foods. In addition to that, Lachlan Star is 3.5 times more volatile than Collins Foods. It trades about -0.15 of its total potential returns per unit of risk. Collins Foods is currently generating about -0.1 per unit of volatility. If you would invest 837.00 in Collins Foods on September 12, 2024 and sell it today you would lose (49.00) from holding Collins Foods or give up 5.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lachlan Star vs. Collins Foods
Performance |
| Timeline |
| Lachlan Star |
| Collins Foods |
Lachlan Star and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lachlan Star and Collins Foods
The main advantage of trading using opposite Lachlan Star and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lachlan Star position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| Lachlan Star vs. Black Rock Mining | Lachlan Star vs. Air New Zealand | Lachlan Star vs. Step One Clothing | Lachlan Star vs. Truscott Mining Corp |
| Collins Foods vs. Homeco Daily Needs | Collins Foods vs. Australian Unity Office | Collins Foods vs. Farm Pride Foods | Collins Foods vs. Viva Leisure |
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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