Correlation Between Ansell and Latham

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

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

Diversification Opportunities for Ansell and Latham

0.63

Correlation Coefficient

Ansell  Latham

Poor diversification

The 3 months correlation between Ansell and Latham is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ansell Ltd ADR and Latham Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latham Group and Ansell 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 Ansell Ltd ADR are associated (or correlated) with Latham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latham Group has no effect on the direction of Ansell i.e., Ansell and Latham go up and down completely randomly.

Pair Corralation between Ansell and Latham

Assuming the 90 days horizon Ansell is expected to generate 1.46 times less return on investment than Latham. But when comparing it to its historical volatility, Ansell Ltd ADR is 3.88 times less risky than Latham. It trades about 0.13 of its potential returns per unit of risk. Latham Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Latham Group on July 11, 2024 and sell it today you would earn a total of  310.00  from holding Latham Group or generate 84.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	15.76%
Values	Daily Returns

Ansell Ltd ADR  vs.  Latham Group

Ansell Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ansell Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Ansell is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Latham Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Latham Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Latham displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ansell and Latham

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

The idea behind Ansell Ltd ADR and Latham Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.