Correlation Between Thrace Plastics and LAMDA Development

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

By analyzing existing cross correlation between Thrace Plastics Holding and LAMDA Development SA, you can compare the effects of market volatilities on Thrace Plastics and LAMDA Development 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 Thrace Plastics with a short position of LAMDA Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrace Plastics and LAMDA Development.

Diversification Opportunities for Thrace Plastics and LAMDA Development

-0.48

Correlation Coefficient

Thrace Plastics  LAMDA Development

Very good diversification

The 3 months correlation between Thrace and LAMDA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Thrace Plastics Holding and LAMDA Development SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMDA Development and Thrace Plastics 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 Thrace Plastics Holding are associated (or correlated) with LAMDA Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMDA Development has no effect on the direction of Thrace Plastics i.e., Thrace Plastics and LAMDA Development go up and down completely randomly.

Pair Corralation between Thrace Plastics and LAMDA Development

Assuming the 90 days trading horizon Thrace Plastics Holding is expected to generate 0.88 times more return on investment than LAMDA Development. However, Thrace Plastics Holding is 1.13 times less risky than LAMDA Development. It trades about 0.02 of its potential returns per unit of risk. LAMDA Development SA is currently generating about -0.01 per unit of risk. If you would invest  391.00  in Thrace Plastics Holding on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Thrace Plastics Holding or generate 1.28% return on investment over 90 days.

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

Thrace Plastics Holding  vs.  LAMDA Development SA

Thrace Plastics Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thrace Plastics Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Thrace Plastics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LAMDA Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAMDA Development SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LAMDA Development is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thrace Plastics and LAMDA Development

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

The idea behind Thrace Plastics Holding and LAMDA Development 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.