Correlation Between MW Trade and LPP SA
Can any of the company-specific risk be diversified away by investing in both MW Trade and LPP SA 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 MW Trade and LPP SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MW Trade SA and LPP SA, you can compare the effects of market volatilities on MW Trade and LPP SA 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 MW Trade with a short position of LPP SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MW Trade and LPP SA.
Diversification Opportunities for MW Trade and LPP SA
Very good diversification
The 3 months correlation between MWT and LPP is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding MW Trade SA and LPP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPP SA and MW Trade 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 MW Trade SA are associated (or correlated) with LPP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPP SA has no effect on the direction of MW Trade i.e., MW Trade and LPP SA go up and down completely randomly.
Pair Corralation between MW Trade and LPP SA
Assuming the 90 days trading horizon MW Trade SA is expected to under-perform the LPP SA. But the stock apears to be less risky and, when comparing its historical volatility, MW Trade SA is 1.48 times less risky than LPP SA. The stock trades about -0.38 of its potential returns per unit of risk. The LPP SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,501,000 in LPP SA on August 31, 2024 and sell it today you would earn a total of 44,000 from holding LPP SA or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MW Trade SA vs. LPP SA
Performance |
| Timeline |
| MW Trade SA |
| LPP SA |
MW Trade and LPP SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MW Trade and LPP SA
The main advantage of trading using opposite MW Trade and LPP SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MW Trade position performs unexpectedly, LPP SA 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 LPP SA will offset losses from the drop in LPP SA's long position.| MW Trade vs. Kruk SA | MW Trade vs. Investment Friends Capital | MW Trade vs. Asseco Business Solutions | MW Trade vs. Detalion Games SA |
| LPP SA vs. Monnari Trade SA | LPP SA vs. Esotiq Henderson SA | LPP SA vs. Asseco Business Solutions | LPP SA vs. Detalion Games SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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