Correlation Between L1 Long and Peel Mining
Can any of the company-specific risk be diversified away by investing in both L1 Long and Peel 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 L1 Long and Peel Mining 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 Peel Mining, you can compare the effects of market volatilities on L1 Long and Peel 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 L1 Long with a short position of Peel Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and Peel Mining.
Diversification Opportunities for L1 Long and Peel Mining
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LSF and Peel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and Peel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining has no effect on the direction of L1 Long i.e., L1 Long and Peel Mining go up and down completely randomly.
Pair Corralation between L1 Long and Peel Mining
Assuming the 90 days trading horizon L1 Long Short is expected to generate 0.58 times more return on investment than Peel Mining. However, L1 Long Short is 1.72 times less risky than Peel Mining. It trades about -0.05 of its potential returns per unit of risk. Peel Mining is currently generating about -0.11 per unit of risk. If you would invest 312.00 in L1 Long Short on August 29, 2024 and sell it today you would lose (7.00) from holding L1 Long Short or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
L1 Long Short vs. Peel Mining
Performance |
| Timeline |
| L1 Long Short |
| Peel Mining |
L1 Long and Peel Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L1 Long and Peel Mining
The main advantage of trading using opposite L1 Long and Peel Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long position performs unexpectedly, Peel 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 Peel Mining will offset losses from the drop in Peel Mining's long position.| L1 Long vs. Champion Iron | L1 Long vs. Ridley | L1 Long vs. Peel Mining | L1 Long vs. Australian Dairy Farms |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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