Correlation Between Transport and LDG Investment

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

By analyzing existing cross correlation between Transport and Industry and LDG Investment JSC, you can compare the effects of market volatilities on Transport and LDG Investment 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 Transport with a short position of LDG Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and LDG Investment.

Diversification Opportunities for Transport and LDG Investment

0.06

Correlation Coefficient

Transport  LDG Investment

Significant diversification

The 3 months correlation between Transport and LDG is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and LDG Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LDG Investment JSC and Transport 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 Transport and Industry are associated (or correlated) with LDG Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LDG Investment JSC has no effect on the direction of Transport i.e., Transport and LDG Investment go up and down completely randomly.

Pair Corralation between Transport and LDG Investment

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the LDG Investment. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 1.36 times less risky than LDG Investment. The stock trades about -0.2 of its potential returns per unit of risk. The LDG Investment JSC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  181,000  in LDG Investment JSC on September 15, 2024 and sell it today you would earn a total of  7,000  from holding LDG Investment JSC or generate 3.87% return on investment over 90 days.

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

Transport and Industry  vs.  LDG Investment JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

LDG Investment JSC

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LDG Investment JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, LDG Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Transport and LDG Investment

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

The idea behind Transport and Industry and LDG Investment JSC 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.