Correlation Between LPP SA and Gaming Factory

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

By analyzing existing cross correlation between LPP SA and Gaming Factory SA, you can compare the effects of market volatilities on LPP SA and Gaming Factory 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 LPP SA with a short position of Gaming Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPP SA and Gaming Factory.

Diversification Opportunities for LPP SA and Gaming Factory

-0.4

Correlation Coefficient

LPP SA  Gaming Factory

Very good diversification

The 3 months correlation between LPP and Gaming is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding LPP SA and Gaming Factory SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Factory SA and LPP SA 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 LPP SA are associated (or correlated) with Gaming Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Factory SA has no effect on the direction of LPP SA i.e., LPP SA and Gaming Factory go up and down completely randomly.

Pair Corralation between LPP SA and Gaming Factory

Assuming the 90 days trading horizon LPP SA is expected to generate 0.91 times more return on investment than Gaming Factory. However, LPP SA is 1.1 times less risky than Gaming Factory. It trades about 0.05 of its potential returns per unit of risk. Gaming Factory SA is currently generating about 0.03 per unit of risk. If you would invest  895,836  in LPP SA on August 24, 2024 and sell it today you would earn a total of  570,164  from holding LPP SA or generate 63.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LPP SA  vs.  Gaming Factory SA

LPP SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPP SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, LPP SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Gaming Factory SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Factory SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with LPP SA and Gaming Factory

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

The idea behind LPP SA and Gaming Factory SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.