Correlation Between London Security and Anglesey Mining
Can any of the company-specific risk be diversified away by investing in both London Security and Anglesey Mining 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 Anglesey Mining 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 Anglesey Mining, you can compare the effects of market volatilities on London Security and Anglesey Mining 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 Anglesey Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Anglesey Mining.
Diversification Opportunities for London Security and Anglesey Mining
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between London and Anglesey is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Anglesey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglesey Mining 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 Anglesey Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglesey Mining has no effect on the direction of London Security i.e., London Security and Anglesey Mining go up and down completely randomly.
Pair Corralation between London Security and Anglesey Mining
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.39 times more return on investment than Anglesey Mining. However, London Security Plc is 2.6 times less risky than Anglesey Mining. It trades about 0.05 of its potential returns per unit of risk. Anglesey Mining is currently generating about -0.03 per unit of risk. If you would invest 240,522 in London Security Plc on August 26, 2024 and sell it today you would earn a total of 84,478 from holding London Security Plc or generate 35.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Anglesey Mining
Performance |
| Timeline |
| London Security Plc |
| Anglesey Mining |
London Security and Anglesey Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Anglesey Mining
The main advantage of trading using opposite London Security and Anglesey Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Anglesey Mining 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 Anglesey Mining will offset losses from the drop in Anglesey Mining's long position.| London Security vs. Anglesey Mining | London Security vs. Hochschild Mining plc | London Security vs. Porvair plc | London Security vs. Norwegian Air Shuttle |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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