Correlation Between Lepanto Consolidated and COL Financial

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

By analyzing existing cross correlation between Lepanto Consolidated Mining and COL Financial Group, you can compare the effects of market volatilities on Lepanto Consolidated and COL Financial 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 Lepanto Consolidated with a short position of COL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lepanto Consolidated and COL Financial.

Diversification Opportunities for Lepanto Consolidated and COL Financial

0.7

Correlation Coefficient

Lepanto Consolidated  COL Financial

Poor diversification

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

Pair Corralation between Lepanto Consolidated and COL Financial

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to generate 1.77 times more return on investment than COL Financial. However, Lepanto Consolidated is 1.77 times more volatile than COL Financial Group. It trades about 0.06 of its potential returns per unit of risk. COL Financial Group is currently generating about -0.02 per unit of risk. If you would invest  6.20  in Lepanto Consolidated Mining on September 15, 2024 and sell it today you would earn a total of  0.70  from holding Lepanto Consolidated Mining or generate 11.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  COL Financial Group

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

COL Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COL Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, COL Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lepanto Consolidated and COL Financial

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

The idea behind Lepanto Consolidated Mining and COL Financial Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.