Correlation Between Lindsay and Arts Way
Can any of the company-specific risk be diversified away by investing in both Lindsay and Arts Way 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 Lindsay and Arts Way into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindsay and Arts Way Manufacturing Co, you can compare the effects of market volatilities on Lindsay and Arts Way 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 Lindsay with a short position of Arts Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsay and Arts Way.
Diversification Opportunities for Lindsay and Arts Way
Average diversification
The 3 months correlation between Lindsay and Arts is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lindsay and Arts Way Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arts Way Manufacturing and Lindsay 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 Lindsay are associated (or correlated) with Arts Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arts Way Manufacturing has no effect on the direction of Lindsay i.e., Lindsay and Arts Way go up and down completely randomly.
Pair Corralation between Lindsay and Arts Way
Considering the 90-day investment horizon Lindsay is expected to generate 0.69 times more return on investment than Arts Way. However, Lindsay is 1.45 times less risky than Arts Way. It trades about 0.01 of its potential returns per unit of risk. Arts Way Manufacturing Co is currently generating about 0.0 per unit of risk. If you would invest 12,592 in Lindsay on January 26, 2024 and sell it today you would lose (696.00) from holding Lindsay or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lindsay vs. Arts Way Manufacturing Co
Performance |
| Timeline |
| Lindsay |
| Arts Way Manufacturing |
Lindsay and Arts Way Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindsay and Arts Way
The main advantage of trading using opposite Lindsay and Arts Way positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsay position performs unexpectedly, Arts Way 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 Arts Way will offset losses from the drop in Arts Way's long position.The idea behind Lindsay and Arts Way Manufacturing Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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