Correlation Between Centrifuge and LAMB

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

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

Diversification Opportunities for Centrifuge and LAMB

0.71

Correlation Coefficient

Centrifuge  LAMB

Poor diversification

The 3 months correlation between Centrifuge and LAMB is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Centrifuge and LAMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMB and Centrifuge 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 Centrifuge 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 Centrifuge i.e., Centrifuge and LAMB go up and down completely randomly.

Pair Corralation between Centrifuge and LAMB

Assuming the 90 days trading horizon Centrifuge is expected to under-perform the LAMB. But the crypto coin apears to be less risky and, when comparing its historical volatility, Centrifuge is 2.12 times less risky than LAMB. The crypto coin trades about -0.15 of its potential returns per unit of risk. The LAMB is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  0.84  in LAMB on February 7, 2024 and sell it today you would lose (0.18) from holding LAMB or give up 21.48% of portfolio value over 90 days.

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

Centrifuge  vs.  LAMB

Centrifuge

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Centrifuge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical and fundamental indicators, Centrifuge exhibited solid returns over the last few months and may actually be approaching a breakup point.

LAMB

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days LAMB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, LAMB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrifuge and LAMB

The main advantage of trading using opposite Centrifuge and LAMB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrifuge 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 Centrifuge 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.