Correlation Between Tetragon Financial and Lavide Holding
Can any of the company-specific risk be diversified away by investing in both Tetragon Financial and Lavide Holding 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 Tetragon Financial and Lavide Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetragon Financial Group and Lavide Holding NV, you can compare the effects of market volatilities on Tetragon Financial and Lavide Holding 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 Tetragon Financial with a short position of Lavide Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetragon Financial and Lavide Holding.
Diversification Opportunities for Tetragon Financial and Lavide Holding
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tetragon and Lavide is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group and Lavide Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavide Holding NV and Tetragon Financial 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 Tetragon Financial Group are associated (or correlated) with Lavide Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavide Holding NV has no effect on the direction of Tetragon Financial i.e., Tetragon Financial and Lavide Holding go up and down completely randomly.
Pair Corralation between Tetragon Financial and Lavide Holding
Assuming the 90 days trading horizon Tetragon Financial is expected to generate 1.29 times less return on investment than Lavide Holding. But when comparing it to its historical volatility, Tetragon Financial Group is 3.33 times less risky than Lavide Holding. It trades about 0.12 of its potential returns per unit of risk. Lavide Holding NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 29.00 in Lavide Holding NV on August 27, 2024 and sell it today you would earn a total of 7.00 from holding Lavide Holding NV or generate 24.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.58% |
| Values | Daily Returns |
Tetragon Financial Group vs. Lavide Holding NV
Performance |
| Timeline |
| Tetragon Financial |
| Lavide Holding NV |
Tetragon Financial and Lavide Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tetragon Financial and Lavide Holding
The main advantage of trading using opposite Tetragon Financial and Lavide Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetragon Financial position performs unexpectedly, Lavide Holding 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 Lavide Holding will offset losses from the drop in Lavide Holding's long position.The idea behind Tetragon Financial Group and Lavide Holding NV 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.| Lavide Holding vs. AMG Advanced Metallurgical | Lavide Holding vs. SBM Offshore NV | Lavide Holding vs. Vastned Retail NV | Lavide Holding vs. BE Semiconductor Industries |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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