Correlation Between DLH Holdings and Lightbridge Corp

Can any of the company-specific risk be diversified away by investing in both DLH Holdings and Lightbridge Corp 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 DLH Holdings and Lightbridge Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DLH Holdings Corp and Lightbridge Corp, you can compare the effects of market volatilities on DLH Holdings and Lightbridge Corp 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 DLH Holdings with a short position of Lightbridge Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Lightbridge Corp.

Diversification Opportunities for DLH Holdings and Lightbridge Corp

-0.7

Correlation Coefficient

DLH Holdings  Lightbridge Corp

Excellent diversification

The 3 months correlation between DLH and Lightbridge is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Lightbridge Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightbridge Corp and DLH Holdings 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 DLH Holdings Corp are associated (or correlated) with Lightbridge Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightbridge Corp has no effect on the direction of DLH Holdings i.e., DLH Holdings and Lightbridge Corp go up and down completely randomly.

Pair Corralation between DLH Holdings and Lightbridge Corp

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the Lightbridge Corp. But the stock apears to be less risky and, when comparing its historical volatility, DLH Holdings Corp is 2.56 times less risky than Lightbridge Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Lightbridge Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  477.00  in Lightbridge Corp on September 3, 2024 and sell it today you would earn a total of  177.00  from holding Lightbridge Corp or generate 37.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DLH Holdings Corp  vs.  Lightbridge Corp

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lightbridge Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lightbridge Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, Lightbridge Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DLH Holdings and Lightbridge Corp

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

The idea behind DLH Holdings Corp and Lightbridge Corp 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.