Correlation Between Lighthouse Capital and Trencor
Can any of the company-specific risk be diversified away by investing in both Lighthouse Capital and Trencor 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 Trencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lighthouse Capital and Trencor, you can compare the effects of market volatilities on Lighthouse Capital and Trencor 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 Trencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lighthouse Capital and Trencor.
Diversification Opportunities for Lighthouse Capital and Trencor
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lighthouse and Trencor is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Capital and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor 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 Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of Lighthouse Capital i.e., Lighthouse Capital and Trencor go up and down completely randomly.
Pair Corralation between Lighthouse Capital and Trencor
Assuming the 90 days trading horizon Lighthouse Capital is expected to under-perform the Trencor. But the stock apears to be less risky and, when comparing its historical volatility, Lighthouse Capital is 2.29 times less risky than Trencor. The stock trades about -0.09 of its potential returns per unit of risk. The Trencor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 73,500 in Trencor on August 30, 2024 and sell it today you would earn a total of 2,500 from holding Trencor or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lighthouse Capital vs. Trencor
Performance |
| Timeline |
| Lighthouse Capital |
| Trencor |
Lighthouse Capital and Trencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lighthouse Capital and Trencor
The main advantage of trading using opposite Lighthouse Capital and Trencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lighthouse Capital position performs unexpectedly, Trencor 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 Trencor will offset losses from the drop in Trencor's long position.| Lighthouse Capital vs. Growthpoint Properties | Lighthouse Capital vs. AfricaRhodium ETF | Lighthouse Capital vs. CoreShares Preference Share | Lighthouse Capital vs. CoreShares TotalWldStock ETF |
| Trencor vs. Afine Investments | Trencor vs. Astral Foods | Trencor vs. Copper 360 | Trencor vs. Reinet Investments SCA |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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