Correlation Between London Security and JLEN Environmental
Can any of the company-specific risk be diversified away by investing in both London Security and JLEN Environmental 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 JLEN Environmental 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 JLEN Environmental Assets, you can compare the effects of market volatilities on London Security and JLEN Environmental 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 JLEN Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and JLEN Environmental.
Diversification Opportunities for London Security and JLEN Environmental
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between London and JLEN is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and JLEN Environmental Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JLEN Environmental Assets 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 JLEN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JLEN Environmental Assets has no effect on the direction of London Security i.e., London Security and JLEN Environmental go up and down completely randomly.
Pair Corralation between London Security and JLEN Environmental
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.76 times more return on investment than JLEN Environmental. However, London Security Plc is 1.31 times less risky than JLEN Environmental. It trades about 0.21 of its potential returns per unit of risk. JLEN Environmental Assets is currently generating about -0.27 per unit of risk. If you would invest 340,000 in London Security Plc on November 3, 2024 and sell it today you would earn a total of 20,000 from holding London Security Plc or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. JLEN Environmental Assets
Performance |
| Timeline |
| London Security Plc |
| JLEN Environmental Assets |
London Security and JLEN Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and JLEN Environmental
The main advantage of trading using opposite London Security and JLEN Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, JLEN Environmental 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 JLEN Environmental will offset losses from the drop in JLEN Environmental's long position.| London Security vs. Eastinco Mining Exploration | London Security vs. Fevertree Drinks Plc | London Security vs. European Metals Holdings | London Security vs. Silver Bullet Data |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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