Correlation Between London Security and Qurate Retail
Can any of the company-specific risk be diversified away by investing in both London Security and Qurate Retail 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 London Security and Qurate Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Qurate Retail Series, you can compare the effects of market volatilities on London Security and Qurate Retail 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 London Security with a short position of Qurate Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Qurate Retail.
Diversification Opportunities for London Security and Qurate Retail
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between London and Qurate is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Qurate Retail Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail Series and London Security 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 London Security Plc are associated (or correlated) with Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail Series has no effect on the direction of London Security i.e., London Security and Qurate Retail go up and down completely randomly.
Pair Corralation between London Security and Qurate Retail
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.25 times more return on investment than Qurate Retail. However, London Security Plc is 3.95 times less risky than Qurate Retail. It trades about 0.22 of its potential returns per unit of risk. Qurate Retail Series is currently generating about -0.26 per unit of risk. If you would invest 325,000 in London Security Plc on September 24, 2024 and sell it today you would earn a total of 15,000 from holding London Security Plc or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Qurate Retail Series
Performance |
| Timeline |
| London Security Plc |
| Qurate Retail Series |
London Security and Qurate Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Qurate Retail
The main advantage of trading using opposite London Security and Qurate Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Qurate Retail 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 Qurate Retail will offset losses from the drop in Qurate Retail's long position.| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor Corp |
| Qurate Retail vs. Uniper SE | Qurate Retail vs. Mulberry Group PLC | Qurate Retail vs. London Security Plc | Qurate Retail vs. Triad Group PLC |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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