Correlation Between London Security and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both London Security and Virgin Wines 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 Virgin Wines 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 Virgin Wines UK, you can compare the effects of market volatilities on London Security and Virgin Wines 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 Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Virgin Wines.
Diversification Opportunities for London Security and Virgin Wines
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between London and Virgin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of London Security i.e., London Security and Virgin Wines go up and down completely randomly.
Pair Corralation between London Security and Virgin Wines
Assuming the 90 days trading horizon London Security is expected to generate 1.13 times less return on investment than Virgin Wines. But when comparing it to its historical volatility, London Security Plc is 2.71 times less risky than Virgin Wines. It trades about 0.06 of its potential returns per unit of risk. Virgin Wines UK is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,150 in Virgin Wines UK on September 2, 2024 and sell it today you would earn a total of 400.00 from holding Virgin Wines UK or generate 12.7% 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. Virgin Wines UK
Performance |
| Timeline |
| London Security Plc |
| Virgin Wines UK |
London Security and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Virgin Wines
The main advantage of trading using opposite London Security and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' long position.| London Security vs. Zoom Video Communications | London Security vs. Amedeo Air Four | London Security vs. Power Metal Resources | London Security vs. Pentair PLC |
| Virgin Wines vs. Coor Service Management | Virgin Wines vs. British American Tobacco | Virgin Wines vs. Liontrust Asset Management | Virgin Wines vs. Atalaya Mining |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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