Correlation Between Quant and LAMB
Can any of the company-specific risk be diversified away by investing in both Quant and LAMB 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 Quant and LAMB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quant and LAMB, you can compare the effects of market volatilities on Quant and LAMB 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 Quant with a short position of LAMB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quant and LAMB.
Diversification Opportunities for Quant and LAMB
Poor diversification
The 3 months correlation between Quant and LAMB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Quant and LAMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMB and Quant 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 Quant are associated (or correlated) with LAMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMB has no effect on the direction of Quant i.e., Quant and LAMB go up and down completely randomly.
Pair Corralation between Quant and LAMB
Assuming the 90 days trading horizon Quant is expected to generate 0.61 times more return on investment than LAMB. However, Quant is 1.63 times less risky than LAMB. It trades about -0.14 of its potential returns per unit of risk. LAMB is currently generating about -0.3 per unit of risk. If you would invest 12,283 in Quant on January 19, 2024 and sell it today you would lose (2,040) from holding Quant or give up 16.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quant vs. LAMB
Performance |
| Timeline |
| Quant |
| LAMB |
Quant and LAMB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quant and LAMB
The main advantage of trading using opposite Quant and LAMB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quant position performs unexpectedly, LAMB 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 LAMB will offset losses from the drop in LAMB's long position.The idea behind Quant and LAMB 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |