Correlation Between Snap and L Catterton
Can any of the company-specific risk be diversified away by investing in both Snap and L Catterton 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 Snap and L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and L Catterton Asia, you can compare the effects of market volatilities on Snap and L Catterton 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 Snap with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and L Catterton.
Diversification Opportunities for Snap and L Catterton
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Snap and LCAAW is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia and Snap 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 Snap Inc are associated (or correlated) with L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Snap i.e., Snap and L Catterton go up and down completely randomly.
Pair Corralation between Snap and L Catterton
Given the investment horizon of 90 days Snap is expected to generate 98.78 times less return on investment than L Catterton. But when comparing it to its historical volatility, Snap Inc is 24.01 times less risky than L Catterton. It trades about 0.03 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.95 in L Catterton Asia on August 30, 2024 and sell it today you would earn a total of 48.05 from holding L Catterton Asia or generate 5057.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 25.45% |
| Values | Daily Returns |
Snap Inc vs. L Catterton Asia
Performance |
| Timeline |
| Snap Inc |
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Snap and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and L Catterton
The main advantage of trading using opposite Snap and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, L Catterton 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 L Catterton will offset losses from the drop in L Catterton's long position.The idea behind Snap Inc and L Catterton Asia 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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