Correlation Between Lancashire Holdings and Mapfre SA

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

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

Diversification Opportunities for Lancashire Holdings and Mapfre SA

0.07

Correlation Coefficient

Lancashire Holdings  Mapfre SA

Significant diversification

The 3 months correlation between Lancashire and Mapfre is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings Limited and Mapfre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre SA and Lancashire 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 Lancashire Holdings Limited are associated (or correlated) with Mapfre SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre SA has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Mapfre SA go up and down completely randomly.

Pair Corralation between Lancashire Holdings and Mapfre SA

Assuming the 90 days horizon Lancashire Holdings is expected to generate 1.19 times less return on investment than Mapfre SA. In addition to that, Lancashire Holdings is 1.94 times more volatile than Mapfre SA. It trades about 0.02 of its total potential returns per unit of risk. Mapfre SA is currently generating about 0.04 per unit of volatility. If you would invest  234.00  in Mapfre SA on September 22, 2024 and sell it today you would earn a total of  7.00  from holding Mapfre SA or generate 2.99% return on investment over 90 days.

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

Lancashire Holdings Limited  vs.  Mapfre SA

Lancashire Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancashire Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lancashire Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mapfre SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mapfre SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lancashire Holdings and Mapfre SA

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

The idea behind Lancashire Holdings Limited and Mapfre SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.