Correlation Between SUN and LUX ISLAND
Can any of the company-specific risk be diversified away by investing in both SUN and LUX ISLAND 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 SUN and LUX ISLAND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SUN LIMITED and LUX ISLAND RESORTS, you can compare the effects of market volatilities on SUN and LUX ISLAND 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 SUN with a short position of LUX ISLAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN and LUX ISLAND.
Diversification Opportunities for SUN and LUX ISLAND
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SUN and LUX is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIMITED and LUX ISLAND RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUX ISLAND RESORTS and SUN 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 SUN LIMITED are associated (or correlated) with LUX ISLAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUX ISLAND RESORTS has no effect on the direction of SUN i.e., SUN and LUX ISLAND go up and down completely randomly.
Pair Corralation between SUN and LUX ISLAND
Assuming the 90 days trading horizon SUN LIMITED is expected to generate 2.87 times more return on investment than LUX ISLAND. However, SUN is 2.87 times more volatile than LUX ISLAND RESORTS. It trades about 0.04 of its potential returns per unit of risk. LUX ISLAND RESORTS is currently generating about 0.03 per unit of risk. If you would invest 2,710 in SUN LIMITED on September 2, 2024 and sell it today you would earn a total of 1,185 from holding SUN LIMITED or generate 43.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.55% |
| Values | Daily Returns |
SUN LIMITED vs. LUX ISLAND RESORTS
Performance |
| Timeline |
| SUN LIMITED |
| LUX ISLAND RESORTS |
SUN and LUX ISLAND Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SUN and LUX ISLAND
The main advantage of trading using opposite SUN and LUX ISLAND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUN position performs unexpectedly, LUX ISLAND 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 LUX ISLAND will offset losses from the drop in LUX ISLAND's long position.The idea behind SUN LIMITED and LUX ISLAND RESORTS 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.| LUX ISLAND vs. FINCORP INVESTMENT LTD | LUX ISLAND vs. MCB GROUP LTD | LUX ISLAND vs. CAUDAN DEVELOPMENT LTD | LUX ISLAND vs. NEW MAURITIUS HOTELS |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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