Correlation Between Laguna Resorts and Regional Container

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

By analyzing existing cross correlation between Laguna Resorts Hotels and Regional Container Lines, you can compare the effects of market volatilities on Laguna Resorts and Regional Container 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 Laguna Resorts with a short position of Regional Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laguna Resorts and Regional Container.

Diversification Opportunities for Laguna Resorts and Regional Container

0.8

Correlation Coefficient

Laguna Resorts  Regional Container

Very poor diversification

The 3 months correlation between Laguna and Regional is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Laguna Resorts Hotels and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines and Laguna Resorts 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 Laguna Resorts Hotels are associated (or correlated) with Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of Laguna Resorts i.e., Laguna Resorts and Regional Container go up and down completely randomly.

Pair Corralation between Laguna Resorts and Regional Container

Assuming the 90 days trading horizon Laguna Resorts is expected to generate 4.13 times less return on investment than Regional Container. But when comparing it to its historical volatility, Laguna Resorts Hotels is 3.14 times less risky than Regional Container. It trades about 0.11 of its potential returns per unit of risk. Regional Container Lines is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,198  in Regional Container Lines on September 13, 2024 and sell it today you would earn a total of  627.00  from holding Regional Container Lines or generate 28.53% return on investment over 90 days.

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

Laguna Resorts Hotels  vs.  Regional Container Lines

Laguna Resorts Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laguna Resorts Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical indicators, Laguna Resorts may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Regional Container Lines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Regional Container disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laguna Resorts and Regional Container

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

The idea behind Laguna Resorts Hotels and Regional Container Lines 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 Commodity Directory module to find actively traded commodities issued by global exchanges.