Correlation Between North American and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both North American and Leons Furniture 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 North American and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Leons Furniture Limited, you can compare the effects of market volatilities on North American and Leons Furniture 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 North American with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Leons Furniture.
Diversification Opportunities for North American and Leons Furniture
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Leons is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and North American 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 North American Construction are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of North American i.e., North American and Leons Furniture go up and down completely randomly.
Pair Corralation between North American and Leons Furniture
Assuming the 90 days trading horizon North American Construction is expected to under-perform the Leons Furniture. In addition to that, North American is 1.15 times more volatile than Leons Furniture Limited. It trades about -0.01 of its total potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.08 per unit of volatility. If you would invest 2,197 in Leons Furniture Limited on September 3, 2024 and sell it today you would earn a total of 515.00 from holding Leons Furniture Limited or generate 23.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Leons Furniture Limited
Performance |
| Timeline |
| North American Const |
| Leons Furniture |
North American and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Leons Furniture
The main advantage of trading using opposite North American and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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