Correlation Between Newbury Street and Lakeshore Acquisition
Can any of the company-specific risk be diversified away by investing in both Newbury Street and Lakeshore Acquisition 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 Newbury Street and Lakeshore Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newbury Street Acquisition and Lakeshore Acquisition II, you can compare the effects of market volatilities on Newbury Street and Lakeshore Acquisition 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 Newbury Street with a short position of Lakeshore Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newbury Street and Lakeshore Acquisition.
Diversification Opportunities for Newbury Street and Lakeshore Acquisition
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Newbury and Lakeshore is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Newbury Street Acquisition and Lakeshore Acquisition II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeshore Acquisition and Newbury Street 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 Newbury Street Acquisition are associated (or correlated) with Lakeshore Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeshore Acquisition has no effect on the direction of Newbury Street i.e., Newbury Street and Lakeshore Acquisition go up and down completely randomly.
Pair Corralation between Newbury Street and Lakeshore Acquisition
If you would invest 1.99 in Lakeshore Acquisition II on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Lakeshore Acquisition II or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newbury Street Acquisition vs. Lakeshore Acquisition II
Performance |
| Timeline |
| Newbury Street Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
| Lakeshore Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Newbury Street and Lakeshore Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newbury Street and Lakeshore Acquisition
The main advantage of trading using opposite Newbury Street and Lakeshore Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newbury Street position performs unexpectedly, Lakeshore Acquisition 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 Lakeshore Acquisition will offset losses from the drop in Lakeshore Acquisition's long position.The idea behind Newbury Street Acquisition and Lakeshore Acquisition II 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.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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