Correlation Between London Security and Thor Industries
Can any of the company-specific risk be diversified away by investing in both London Security and Thor Industries 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 Thor Industries 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 Thor Industries, you can compare the effects of market volatilities on London Security and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Thor Industries.
Diversification Opportunities for London Security and Thor Industries
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between London and Thor is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of London Security i.e., London Security and Thor Industries go up and down completely randomly.
Pair Corralation between London Security and Thor Industries
Assuming the 90 days trading horizon London Security is expected to generate 1.6 times less return on investment than Thor Industries. But when comparing it to its historical volatility, London Security Plc is 1.75 times less risky than Thor Industries. It trades about 0.04 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,248 in Thor Industries on September 23, 2024 and sell it today you would earn a total of 2,308 from holding Thor Industries or generate 31.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 82.83% |
| Values | Daily Returns |
London Security Plc vs. Thor Industries
Performance |
| Timeline |
| London Security Plc |
| Thor Industries |
London Security and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Thor Industries
The main advantage of trading using opposite London Security and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' 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 |
| Thor Industries vs. Uniper SE | Thor Industries vs. Mulberry Group PLC | Thor Industries vs. London Security Plc | Thor Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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