Correlation Between Lapidoth and Inter Industries

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

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

Diversification Opportunities for Lapidoth and Inter Industries

0.47

Correlation Coefficient

Lapidoth  Inter Industries

Very weak diversification

The 3 months correlation between Lapidoth and Inter is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lapidoth and Inter Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Industries and Lapidoth 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 Lapidoth are associated (or correlated) with Inter Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Industries has no effect on the direction of Lapidoth i.e., Lapidoth and Inter Industries go up and down completely randomly.

Pair Corralation between Lapidoth and Inter Industries

Assuming the 90 days trading horizon Lapidoth is expected to generate 0.88 times more return on investment than Inter Industries. However, Lapidoth is 1.14 times less risky than Inter Industries. It trades about 0.21 of its potential returns per unit of risk. Inter Industries is currently generating about 0.11 per unit of risk. If you would invest  534,023  in Lapidoth on September 25, 2024 and sell it today you would earn a total of  123,677  from holding Lapidoth or generate 23.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

Lapidoth  vs.  Inter Industries

Lapidoth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lapidoth sustained solid returns over the last few months and may actually be approaching a breakup point.

Inter Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inter Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lapidoth and Inter Industries

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

The idea behind Lapidoth and Inter Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..