Correlation Between LAMB and QKC

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

By analyzing existing cross correlation between LAMB and QKC, you can compare the effects of market volatilities on LAMB and QKC 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 QKC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAMB and QKC.

Diversification Opportunities for LAMB and QKC

0.72

Correlation Coefficient

LAMB  QKC

Poor diversification

The 3 months correlation between LAMB and QKC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LAMB and QKC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QKC 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 QKC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QKC has no effect on the direction of LAMB i.e., LAMB and QKC go up and down completely randomly.

Pair Corralation between LAMB and QKC

Assuming the 90 days trading horizon LAMB is expected to generate 18.77 times more return on investment than QKC. However, LAMB is 18.77 times more volatile than QKC. It trades about 0.09 of its potential returns per unit of risk. QKC is currently generating about -0.02 per unit of risk. If you would invest  0.16  in LAMB on January 27, 2025 and sell it today you would earn a total of  0.08  from holding LAMB or generate 49.9% return on investment over 90 days.

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

LAMB  vs.  QKC

LAMB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LAMB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, LAMB exhibited solid returns over the last few months and may actually be approaching a breakup point.

QKC

Risk-Adjusted Performance

Very Weak

Over the last 90 days QKC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for QKC shareholders.

Pair Trading with LAMB and QKC

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

The idea behind LAMB and QKC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.