Correlation Between Mytilineos and LAMDA Development

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

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

Diversification Opportunities for Mytilineos and LAMDA Development

0.69

Correlation Coefficient

Mytilineos  LAMDA Development

Poor diversification

The 3 months correlation between Mytilineos and LAMDA is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mytilineos SA and LAMDA Development SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMDA Development and Mytilineos 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 Mytilineos SA are associated (or correlated) with LAMDA Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMDA Development has no effect on the direction of Mytilineos i.e., Mytilineos and LAMDA Development go up and down completely randomly.

Pair Corralation between Mytilineos and LAMDA Development

Assuming the 90 days trading horizon Mytilineos SA is expected to generate 1.01 times more return on investment than LAMDA Development. However, Mytilineos is 1.01 times more volatile than LAMDA Development SA. It trades about 0.01 of its potential returns per unit of risk. LAMDA Development SA is currently generating about 0.0 per unit of risk. If you would invest  3,816  in Mytilineos SA on February 2, 2024 and sell it today you would earn a total of  4.00  from holding Mytilineos SA or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Mytilineos SA  vs.  LAMDA Development SA

Mytilineos SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mytilineos SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Mytilineos is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

LAMDA Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAMDA Development SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LAMDA Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mytilineos and LAMDA Development

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

The idea behind Mytilineos SA and LAMDA Development 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.