Correlation Between London Security and Ocean Harvest
Can any of the company-specific risk be diversified away by investing in both London Security and Ocean Harvest 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 London Security and Ocean Harvest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Ocean Harvest Technology, you can compare the effects of market volatilities on London Security and Ocean Harvest 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 London Security with a short position of Ocean Harvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Ocean Harvest.
Diversification Opportunities for London Security and Ocean Harvest
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between London and Ocean is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Ocean Harvest Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Harvest Technology and London Security 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 London Security Plc are associated (or correlated) with Ocean Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Harvest Technology has no effect on the direction of London Security i.e., London Security and Ocean Harvest go up and down completely randomly.
Pair Corralation between London Security and Ocean Harvest
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.75 times more return on investment than Ocean Harvest. However, London Security Plc is 1.34 times less risky than Ocean Harvest. It trades about -0.09 of its potential returns per unit of risk. Ocean Harvest Technology is currently generating about -0.19 per unit of risk. If you would invest 371,671 in London Security Plc on September 26, 2024 and sell it today you would lose (31,671) from holding London Security Plc or give up 8.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
London Security Plc vs. Ocean Harvest Technology
Performance |
Timeline |
London Security Plc |
Ocean Harvest Technology |
London Security and Ocean Harvest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with London Security and Ocean Harvest
The main advantage of trading using opposite London Security and Ocean Harvest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Ocean Harvest 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 Ocean Harvest will offset losses from the drop in Ocean Harvest's long position.London Security vs. Tungsten West PLC | London Security vs. Argo Group Limited | London Security vs. Hardide PLC | London Security vs. Gfinity PLC |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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