Correlation Between Cable One and Loft II

Can any of the company-specific risk be diversified away by investing in both Cable One and Loft II 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 Cable One and Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cable One and Loft II Fundo, you can compare the effects of market volatilities on Cable One and Loft II 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 Cable One with a short position of Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cable One and Loft II.

Diversification Opportunities for Cable One and Loft II

-0.61

Correlation Coefficient

Cable One  Loft II

Excellent diversification

The 3 months correlation between Cable and Loft is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo and Cable One 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 Cable One are associated (or correlated) with Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of Cable One i.e., Cable One and Loft II go up and down completely randomly.

Pair Corralation between Cable One and Loft II

Assuming the 90 days trading horizon Cable One is expected to generate 0.45 times more return on investment than Loft II. However, Cable One is 2.24 times less risky than Loft II. It trades about 0.17 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.1 per unit of risk. If you would invest  936.00  in Cable One on September 27, 2024 and sell it today you would earn a total of  219.00  from holding Cable One or generate 23.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Cable One  vs.  Loft II Fundo

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loft II Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cable One and Loft II

The main advantage of trading using opposite Cable One and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cable One position performs unexpectedly, Loft II 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 Loft II will offset losses from the drop in Loft II's long position.

The idea behind Cable One and Loft II Fundo 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.