Correlation Between Regional Container and LH Financial

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

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

Diversification Opportunities for Regional Container and LH Financial

-0.52

Correlation Coefficient

Regional Container  LH Financial

Excellent diversification

The 3 months correlation between Regional and LHFG is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and LH Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Financial Group and Regional Container 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 Regional Container Lines are associated (or correlated) with LH Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Financial Group has no effect on the direction of Regional Container i.e., Regional Container and LH Financial go up and down completely randomly.

Pair Corralation between Regional Container and LH Financial

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 1.13 times more return on investment than LH Financial. However, Regional Container is 1.13 times more volatile than LH Financial Group. It trades about -0.01 of its potential returns per unit of risk. LH Financial Group is currently generating about -0.05 per unit of risk. If you would invest  2,775  in Regional Container Lines on September 28, 2024 and sell it today you would lose (10.00) from holding Regional Container Lines or give up 0.36% of portfolio value over 90 days.

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

Regional Container Lines  vs.  LH Financial Group

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

LH Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LH Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals 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 Regional Container and LH Financial

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

The idea behind Regional Container Lines and LH Financial Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.