Correlation Between L1 Long and Platinum Asia
Can any of the company-specific risk be diversified away by investing in both L1 Long and Platinum Asia 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 L1 Long and Platinum Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L1 Long Short and Platinum Asia Investments, you can compare the effects of market volatilities on L1 Long and Platinum Asia 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 L1 Long with a short position of Platinum Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and Platinum Asia.
Diversification Opportunities for L1 Long and Platinum Asia
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LSF and Platinum is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia Investments and L1 Long 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 L1 Long Short are associated (or correlated) with Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of L1 Long i.e., L1 Long and Platinum Asia go up and down completely randomly.
Pair Corralation between L1 Long and Platinum Asia
Assuming the 90 days trading horizon L1 Long is expected to generate 1.03 times less return on investment than Platinum Asia. But when comparing it to its historical volatility, L1 Long Short is 1.06 times less risky than Platinum Asia. It trades about 0.05 of its potential returns per unit of risk. Platinum Asia Investments is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 78.00 in Platinum Asia Investments on August 30, 2024 and sell it today you would earn a total of 21.00 from holding Platinum Asia Investments or generate 26.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
L1 Long Short vs. Platinum Asia Investments
Performance |
| Timeline |
| L1 Long Short |
| Platinum Asia Investments |
L1 Long and Platinum Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L1 Long and Platinum Asia
The main advantage of trading using opposite L1 Long and Platinum Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long position performs unexpectedly, Platinum Asia 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 Platinum Asia will offset losses from the drop in Platinum Asia's long position.| L1 Long vs. Champion Iron | L1 Long vs. Ridley | L1 Long vs. Peel Mining | L1 Long vs. Australian Dairy Farms |
| Platinum Asia vs. Champion Iron | Platinum Asia vs. Ridley | Platinum Asia vs. Peel Mining | Platinum Asia vs. Australian Dairy Farms |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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