Correlation Between Lighthouse Capital and African Media
Can any of the company-specific risk be diversified away by investing in both Lighthouse Capital and African Media 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 Lighthouse Capital and African Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lighthouse Capital and African Media Entertainment, you can compare the effects of market volatilities on Lighthouse Capital and African Media 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 Lighthouse Capital with a short position of African Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lighthouse Capital and African Media.
Diversification Opportunities for Lighthouse Capital and African Media
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lighthouse and African is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Capital and African Media Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Media Entert and Lighthouse Capital 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 Lighthouse Capital are associated (or correlated) with African Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Media Entert has no effect on the direction of Lighthouse Capital i.e., Lighthouse Capital and African Media go up and down completely randomly.
Pair Corralation between Lighthouse Capital and African Media
Assuming the 90 days trading horizon Lighthouse Capital is expected to generate 0.23 times more return on investment than African Media. However, Lighthouse Capital is 4.3 times less risky than African Media. It trades about -0.1 of its potential returns per unit of risk. African Media Entertainment is currently generating about -0.04 per unit of risk. If you would invest 78,300 in Lighthouse Capital on September 4, 2024 and sell it today you would lose (1,500) from holding Lighthouse Capital or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lighthouse Capital vs. African Media Entertainment
Performance |
| Timeline |
| Lighthouse Capital |
| African Media Entert |
Lighthouse Capital and African Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lighthouse Capital and African Media
The main advantage of trading using opposite Lighthouse Capital and African Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lighthouse Capital position performs unexpectedly, African Media 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 African Media will offset losses from the drop in African Media's long position.| Lighthouse Capital vs. African Media Entertainment | Lighthouse Capital vs. Harmony Gold Mining | Lighthouse Capital vs. HomeChoice Investments | Lighthouse Capital vs. Hosken Consolidated Investments |
| African Media vs. Sasol Ltd Bee | African Media vs. Centaur Bci Balanced | African Media vs. Sabvest Capital | African Media vs. Growthpoint Properties |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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