Correlation Between TMT Investments and Litigation Capital
Can any of the company-specific risk be diversified away by investing in both TMT Investments and Litigation Capital 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 TMT Investments and Litigation Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMT Investments PLC and Litigation Capital Management, you can compare the effects of market volatilities on TMT Investments and Litigation Capital 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 TMT Investments with a short position of Litigation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Investments and Litigation Capital.
Diversification Opportunities for TMT Investments and Litigation Capital
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TMT and Litigation is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding TMT Investments PLC and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital and TMT Investments 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 TMT Investments PLC are associated (or correlated) with Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of TMT Investments i.e., TMT Investments and Litigation Capital go up and down completely randomly.
Pair Corralation between TMT Investments and Litigation Capital
Assuming the 90 days trading horizon TMT Investments is expected to generate 1.79 times less return on investment than Litigation Capital. In addition to that, TMT Investments is 1.04 times more volatile than Litigation Capital Management. It trades about 0.02 of its total potential returns per unit of risk. Litigation Capital Management is currently generating about 0.05 per unit of volatility. If you would invest 9,777 in Litigation Capital Management on August 25, 2024 and sell it today you would earn a total of 1,798 from holding Litigation Capital Management or generate 18.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMT Investments PLC vs. Litigation Capital Management
Performance |
| Timeline |
| TMT Investments PLC |
| Litigation Capital |
TMT Investments and Litigation Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMT Investments and Litigation Capital
The main advantage of trading using opposite TMT Investments and Litigation Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Investments position performs unexpectedly, Litigation Capital 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 Litigation Capital will offset losses from the drop in Litigation Capital's long position.| TMT Investments vs. Retail Estates NV | TMT Investments vs. Ross Stores | TMT Investments vs. Tatton Asset Management | TMT Investments vs. Litigation Capital Management |
| Litigation Capital vs. Catalyst Media Group | Litigation Capital vs. Oncimmune Holdings plc | Litigation Capital vs. Invesco Health Care | Litigation Capital vs. Coor Service Management |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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