Correlation Between London Security and Bath Body
Can any of the company-specific risk be diversified away by investing in both London Security and Bath Body 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 Bath Body 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 Bath Body Works, you can compare the effects of market volatilities on London Security and Bath Body 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 Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Bath Body.
Diversification Opportunities for London Security and Bath Body
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between London and Bath is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of London Security i.e., London Security and Bath Body go up and down completely randomly.
Pair Corralation between London Security and Bath Body
Assuming the 90 days trading horizon London Security is expected to generate 2.19 times less return on investment than Bath Body. But when comparing it to its historical volatility, London Security Plc is 2.74 times less risky than Bath Body. It trades about 0.22 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,590 in Bath Body Works on September 24, 2024 and sell it today you would earn a total of 352.00 from holding Bath Body Works or generate 9.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Bath Body Works
Performance |
| Timeline |
| London Security Plc |
| Bath Body Works |
London Security and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Bath Body
The main advantage of trading using opposite London Security and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body'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 |
| Bath Body vs. Uniper SE | Bath Body vs. Mulberry Group PLC | Bath Body vs. London Security Plc | Bath Body 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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