Correlation Between LSI Software and PMPG Polskie
Can any of the company-specific risk be diversified away by investing in both LSI Software and PMPG Polskie 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 LSI Software and PMPG Polskie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LSI Software SA and PMPG Polskie Media, you can compare the effects of market volatilities on LSI Software and PMPG Polskie 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 LSI Software with a short position of PMPG Polskie. Check out your portfolio center. Please also check ongoing floating volatility patterns of LSI Software and PMPG Polskie.
Diversification Opportunities for LSI Software and PMPG Polskie
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LSI and PMPG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding LSI Software SA and PMPG Polskie Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMPG Polskie Media and LSI Software 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 LSI Software SA are associated (or correlated) with PMPG Polskie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMPG Polskie Media has no effect on the direction of LSI Software i.e., LSI Software and PMPG Polskie go up and down completely randomly.
Pair Corralation between LSI Software and PMPG Polskie
Assuming the 90 days trading horizon LSI Software SA is expected to generate 0.67 times more return on investment than PMPG Polskie. However, LSI Software SA is 1.49 times less risky than PMPG Polskie. It trades about 0.04 of its potential returns per unit of risk. PMPG Polskie Media is currently generating about -0.02 per unit of risk. If you would invest 1,174 in LSI Software SA on September 3, 2024 and sell it today you would earn a total of 376.00 from holding LSI Software SA or generate 32.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
LSI Software SA vs. PMPG Polskie Media
Performance |
| Timeline |
| LSI Software SA |
| PMPG Polskie Media |
LSI Software and PMPG Polskie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LSI Software and PMPG Polskie
The main advantage of trading using opposite LSI Software and PMPG Polskie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LSI Software position performs unexpectedly, PMPG Polskie 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 PMPG Polskie will offset losses from the drop in PMPG Polskie's long position.The idea behind LSI Software SA and PMPG Polskie Media pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| PMPG Polskie vs. Asseco Business Solutions | PMPG Polskie vs. Detalion Games SA | PMPG Polskie vs. Kogeneracja SA | PMPG Polskie vs. Asseco South Eastern |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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