Correlation Between Lands End and Plus500

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Can any of the company-specific risk be diversified away by investing in both Lands End and Plus500 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 Lands End and Plus500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lands End and Plus500, you can compare the effects of market volatilities on Lands End and Plus500 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 Lands End with a short position of Plus500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lands End and Plus500.

Diversification Opportunities for Lands End and Plus500

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lands and Plus500 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Plus500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plus500 and Lands End 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 Lands End are associated (or correlated) with Plus500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plus500 has no effect on the direction of Lands End i.e., Lands End and Plus500 go up and down completely randomly.

Pair Corralation between Lands End and Plus500

Allowing for the 90-day total investment horizon Lands End is expected to generate 2.1 times more return on investment than Plus500. However, Lands End is 2.1 times more volatile than Plus500. It trades about 0.04 of its potential returns per unit of risk. Plus500 is currently generating about 0.03 per unit of risk. If you would invest  1,147  in Lands End on May 10, 2022 and sell it today you would earn a total of  391.00  from holding Lands End or generate 34.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Lands End  vs.  Plus500

 Performance (%) 
       Timeline  
Lands End 
Lands Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lands Price Channel

Plus500 
Plus500 Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Plus500 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Plus500 may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Plus500 Price Channel

Lands End and Plus500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lands End and Plus500

The main advantage of trading using opposite Lands End and Plus500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End position performs unexpectedly, Plus500 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 Plus500 will offset losses from the drop in Plus500's long position.
The idea behind Lands End and Plus500 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.

Plus500

Pair trading matchups for Plus500

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Plus500 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Plus500's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Plus500's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Plus500.
Check out your portfolio center. 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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