Correlation Between Origin Materials and Lsb Industries
Can any of the company-specific risk be diversified away by investing in both Origin Materials and Lsb Industries 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 Origin Materials and Lsb Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Materials Warrant and Lsb Industries, you can compare the effects of market volatilities on Origin Materials and Lsb Industries 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 Origin Materials with a short position of Lsb Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Materials and Lsb Industries.
Diversification Opportunities for Origin Materials and Lsb Industries
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Origin and Lsb is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials Warrant and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries and Origin Materials 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 Origin Materials Warrant are associated (or correlated) with Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of Origin Materials i.e., Origin Materials and Lsb Industries go up and down completely randomly.
Pair Corralation between Origin Materials and Lsb Industries
Assuming the 90 days horizon Origin Materials Warrant is expected to generate 4.54 times more return on investment than Lsb Industries. However, Origin Materials is 4.54 times more volatile than Lsb Industries. It trades about 0.03 of its potential returns per unit of risk. Lsb Industries is currently generating about -0.01 per unit of risk. If you would invest 98.00 in Origin Materials Warrant on August 28, 2024 and sell it today you would lose (88.00) from holding Origin Materials Warrant or give up 89.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Materials Warrant vs. Lsb Industries
Performance |
| Timeline |
| Origin Materials Warrant |
| Lsb Industries |
Origin Materials and Lsb Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Materials and Lsb Industries
The main advantage of trading using opposite Origin Materials and Lsb Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials position performs unexpectedly, Lsb Industries 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 Lsb Industries will offset losses from the drop in Lsb Industries' long position.The idea behind Origin Materials Warrant and Lsb Industries 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.| Lsb Industries vs. Green Plains Renewable | Lsb Industries vs. AdvanSix | Lsb Industries vs. Tronox Holdings PLC | Lsb Industries vs. Methanex |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |