Correlation Between LPN Development and Jasmine International

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

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

Diversification Opportunities for LPN Development and Jasmine International

0.29

Correlation Coefficient

LPN Development  Jasmine International

Modest diversification

The 3 months correlation between LPN and Jasmine is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding LPN Development Public and Jasmine International Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jasmine International and LPN Development 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 LPN Development Public are associated (or correlated) with Jasmine International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jasmine International has no effect on the direction of LPN Development i.e., LPN Development and Jasmine International go up and down completely randomly.

Pair Corralation between LPN Development and Jasmine International

Assuming the 90 days trading horizon LPN Development Public is expected to generate 0.42 times more return on investment than Jasmine International. However, LPN Development Public is 2.4 times less risky than Jasmine International. It trades about -0.06 of its potential returns per unit of risk. Jasmine International Public is currently generating about -0.04 per unit of risk. If you would invest  302.00  in LPN Development Public on September 4, 2024 and sell it today you would lose (16.00) from holding LPN Development Public or give up 5.3% of portfolio value over 90 days.

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

LPN Development Public  vs.  Jasmine International Public

LPN Development Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LPN Development Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, LPN Development is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jasmine International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jasmine International Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with LPN Development and Jasmine International

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

The idea behind LPN Development Public and Jasmine International Public 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.