Correlation Between London Security and Overstock
Can any of the company-specific risk be diversified away by investing in both London Security and Overstock 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 Overstock 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 Overstock, you can compare the effects of market volatilities on London Security and Overstock 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 Overstock. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Overstock.
Diversification Opportunities for London Security and Overstock
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between London and Overstock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock 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 Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of London Security i.e., London Security and Overstock go up and down completely randomly.
Pair Corralation between London Security and Overstock
If you would invest 561.00 in Overstock on October 13, 2024 and sell it today you would earn a total of 22.00 from holding Overstock or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
London Security Plc vs. Overstock
Performance |
| Timeline |
| London Security Plc |
| Overstock |
London Security and Overstock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Overstock
The main advantage of trading using opposite London Security and Overstock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Overstock 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 Overstock will offset losses from the drop in Overstock's long position.| London Security vs. Home Depot | London Security vs. Pets at Home | London Security vs. Cairn Homes PLC | London Security vs. National Beverage Corp |
| Overstock vs. Capital Metals PLC | Overstock vs. Pets at Home | Overstock vs. Europa Metals | Overstock vs. Alien Metals |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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