Correlation Between Snap and Lindsay
Can any of the company-specific risk be diversified away by investing in both Snap and Lindsay 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 Lindsay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Lindsay, you can compare the effects of market volatilities on Snap and Lindsay 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 Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Lindsay.
Diversification Opportunities for Snap and Lindsay
Very weak diversification
The 3 months correlation between Snap and Lindsay is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay 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 Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Snap i.e., Snap and Lindsay go up and down completely randomly.
Pair Corralation between Snap and Lindsay
Given the investment horizon of 90 days Snap is expected to generate 1.38 times less return on investment than Lindsay. In addition to that, Snap is 1.79 times more volatile than Lindsay. It trades about 0.08 of its total potential returns per unit of risk. Lindsay is currently generating about 0.2 per unit of volatility. If you would invest 11,787 in Lindsay on August 30, 2024 and sell it today you would earn a total of 1,375 from holding Lindsay or generate 11.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Snap Inc vs. Lindsay
Performance |
Timeline |
Snap Inc |
Lindsay |
Snap and Lindsay Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Snap and Lindsay
The main advantage of trading using opposite Snap and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.The idea behind Snap Inc and Lindsay 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.Lindsay vs. MYR Group | Lindsay vs. Granite Construction Incorporated | Lindsay vs. Construction Partners | Lindsay vs. Great Lakes Dredge |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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