Correlation Between London Security and Roper Technologies
Can any of the company-specific risk be diversified away by investing in both London Security and Roper Technologies 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 Roper Technologies 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 Roper Technologies, you can compare the effects of market volatilities on London Security and Roper Technologies 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Roper Technologies.
Diversification Opportunities for London Security and Roper Technologies
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between London and Roper is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of London Security i.e., London Security and Roper Technologies go up and down completely randomly.
Pair Corralation between London Security and Roper Technologies
Assuming the 90 days trading horizon London Security Plc is expected to under-perform the Roper Technologies. In addition to that, London Security is 1.67 times more volatile than Roper Technologies. It trades about -0.21 of its total potential returns per unit of risk. Roper Technologies is currently generating about 0.17 per unit of volatility. If you would invest 54,224 in Roper Technologies on September 1, 2024 and sell it today you would earn a total of 2,539 from holding Roper Technologies or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Roper Technologies
Performance |
| Timeline |
| London Security Plc |
| Roper Technologies |
London Security and Roper Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Roper Technologies
The main advantage of trading using opposite London Security and Roper Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Roper Technologies 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 Roper Technologies will offset losses from the drop in Roper Technologies' 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 |
| Roper Technologies vs. Uniper SE | Roper Technologies vs. Mulberry Group PLC | Roper Technologies vs. London Security Plc | Roper Technologies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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