Correlation Between LAMB and SEELE
Can any of the company-specific risk be diversified away by investing in both LAMB and SEELE 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 LAMB and SEELE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAMB and SEELE, you can compare the effects of market volatilities on LAMB and SEELE 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 LAMB with a short position of SEELE. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAMB and SEELE.
Diversification Opportunities for LAMB and SEELE
Pay attention - limited upside
The 3 months correlation between LAMB and SEELE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LAMB and SEELE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEELE and LAMB 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 LAMB are associated (or correlated) with SEELE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEELE has no effect on the direction of LAMB i.e., LAMB and SEELE go up and down completely randomly.
Pair Corralation between LAMB and SEELE
Assuming the 90 days trading horizon LAMB is expected to generate 28.88 times less return on investment than SEELE. But when comparing it to its historical volatility, LAMB is 13.81 times less risky than SEELE. It trades about 0.06 of its potential returns per unit of risk. SEELE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.69 in SEELE on January 20, 2024 and sell it today you would lose (0.69) from holding SEELE or give up 99.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 84.63% |
| Values | Daily Returns |
LAMB vs. SEELE
Performance |
| Timeline |
| LAMB |
| SEELE |
LAMB and SEELE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAMB and SEELE
The main advantage of trading using opposite LAMB and SEELE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAMB position performs unexpectedly, SEELE 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 SEELE will offset losses from the drop in SEELE's long position.The idea behind LAMB and SEELE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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