Correlation Between Portal and LTO

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

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

Diversification Opportunities for Portal and LTO

0.62

Correlation Coefficient

Portal  LTO

Poor diversification

The 3 months correlation between Portal and LTO is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Portal and LTO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTO and Portal 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 Portal are associated (or correlated) with LTO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTO has no effect on the direction of Portal i.e., Portal and LTO go up and down completely randomly.

Pair Corralation between Portal and LTO

Assuming the 90 days trading horizon Portal is expected to generate 12.79 times more return on investment than LTO. However, Portal is 12.79 times more volatile than LTO. It trades about 0.08 of its potential returns per unit of risk. LTO is currently generating about 0.15 per unit of risk. If you would invest  0.00  in Portal on January 30, 2024 and sell it today you would earn a total of  91.00  from holding Portal or generate 9.223372036854776E16% return on investment over 90 days.

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

Portal  vs.  LTO

Portal

Risk-Adjusted Performance

9 of 100

OK

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

LTO

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LTO are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LTO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Portal and LTO

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

The idea behind Portal and LTO 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.