Correlation Between London Security and Public Service
Can any of the company-specific risk be diversified away by investing in both London Security and Public Service 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 Public Service 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 Public Service Enterprise, you can compare the effects of market volatilities on London Security and Public Service 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 Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Public Service.
Diversification Opportunities for London Security and Public Service
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between London and Public is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise 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 Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of London Security i.e., London Security and Public Service go up and down completely randomly.
Pair Corralation between London Security and Public Service
Assuming the 90 days trading horizon London Security is expected to generate 1.3 times less return on investment than Public Service. In addition to that, London Security is 1.22 times more volatile than Public Service Enterprise. It trades about 0.04 of its total potential returns per unit of risk. Public Service Enterprise is currently generating about 0.07 per unit of volatility. If you would invest 5,882 in Public Service Enterprise on September 23, 2024 and sell it today you would earn a total of 2,553 from holding Public Service Enterprise or generate 43.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.81% |
| Values | Daily Returns |
London Security Plc vs. Public Service Enterprise
Performance |
| Timeline |
| London Security Plc |
| Public Service Enterprise |
London Security and Public Service Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Public Service
The main advantage of trading using opposite London Security and Public Service positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Public Service 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 Public Service will offset losses from the drop in Public Service'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 |
| Public Service vs. Uniper SE | Public Service vs. Mulberry Group PLC | Public Service vs. London Security Plc | Public Service 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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