Correlation Between London Security and Travel Leisure
Can any of the company-specific risk be diversified away by investing in both London Security and Travel Leisure 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 Travel Leisure 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 Travel Leisure Co, you can compare the effects of market volatilities on London Security and Travel Leisure 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 Travel Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Travel Leisure.
Diversification Opportunities for London Security and Travel Leisure
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between London and Travel is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of London Security i.e., London Security and Travel Leisure go up and down completely randomly.
Pair Corralation between London Security and Travel Leisure
Assuming the 90 days trading horizon London Security Plc is expected to generate 5.19 times more return on investment than Travel Leisure. However, London Security is 5.19 times more volatile than Travel Leisure Co. It trades about 0.22 of its potential returns per unit of risk. Travel Leisure Co is currently generating about 0.22 per unit of risk. If you would invest 325,000 in London Security Plc on September 24, 2024 and sell it today you would earn a total of 15,000 from holding London Security Plc or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
London Security Plc vs. Travel Leisure Co
Performance |
| Timeline |
| London Security Plc |
| Travel Leisure |
London Security and Travel Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Travel Leisure
The main advantage of trading using opposite London Security and Travel Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Travel Leisure 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 Travel Leisure will offset losses from the drop in Travel Leisure'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 |
| Travel Leisure vs. Uniper SE | Travel Leisure vs. Mulberry Group PLC | Travel Leisure vs. London Security Plc | Travel Leisure 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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