Correlation Between VMG Consumer and LAMF Global
Can any of the company-specific risk be diversified away by investing in both VMG Consumer and LAMF Global 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 VMG Consumer and LAMF Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMG Consumer Acquisition and LAMF Global Ventures, you can compare the effects of market volatilities on VMG Consumer and LAMF Global 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 VMG Consumer with a short position of LAMF Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMG Consumer and LAMF Global.
Diversification Opportunities for VMG Consumer and LAMF Global
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VMG and LAMF is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding VMG Consumer Acquisition and LAMF Global Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMF Global Ventures and VMG Consumer 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 VMG Consumer Acquisition are associated (or correlated) with LAMF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMF Global Ventures has no effect on the direction of VMG Consumer i.e., VMG Consumer and LAMF Global go up and down completely randomly.
Pair Corralation between VMG Consumer and LAMF Global
Assuming the 90 days horizon VMG Consumer Acquisition is expected to generate 0.74 times more return on investment than LAMF Global. However, VMG Consumer Acquisition is 1.36 times less risky than LAMF Global. It trades about 0.05 of its potential returns per unit of risk. LAMF Global Ventures is currently generating about 0.02 per unit of risk. If you would invest 1,011 in VMG Consumer Acquisition on August 30, 2024 and sell it today you would earn a total of 28.00 from holding VMG Consumer Acquisition or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 74.03% |
| Values | Daily Returns |
VMG Consumer Acquisition vs. LAMF Global Ventures
Performance |
| Timeline |
| VMG Consumer Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LAMF Global Ventures |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
VMG Consumer and LAMF Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMG Consumer and LAMF Global
The main advantage of trading using opposite VMG Consumer and LAMF Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMG Consumer position performs unexpectedly, LAMF Global 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 LAMF Global will offset losses from the drop in LAMF Global's long position.The idea behind VMG Consumer Acquisition and LAMF Global Ventures 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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