Correlation Between Lmp Automotive and Axcella Health

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

Diversification Opportunities for Lmp Automotive and Axcella Health

  Correlation Coefficient

Modest diversification

The 3 months correlation between Lmp Automotive and Axcella is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lmp Automotive Holdings and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health and Lmp Automotive 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 Lmp Automotive Holdings are associated (or correlated) with Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Lmp Automotive i.e., Lmp Automotive and Axcella Health go up and down completely randomly.

Pair Corralation between Lmp Automotive and Axcella Health

Given the investment horizon of 90 days Lmp Automotive Holdings is expected to under-perform the Axcella Health. But the stock apears to be less risky and, when comparing its historical volatility, Lmp Automotive Holdings is 5.59 times less risky than Axcella Health. The stock trades about -0.23 of its potential returns per unit of risk. The Axcella Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Axcella Health on September 4, 2022 and sell it today you would earn a total of  1.00  from holding Axcella Health or generate 1.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Lmp Automotive Holdings  vs.  Axcella Health

 Performance (%) 
Lmp Automotive Holdings 
Lmp Automotive Performance
0 of 100
Over the last 90 days Lmp Automotive Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lmp Automotive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lmp Automotive Price Channel

Axcella Health 
Axcella Performance
0 of 100
Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Axcella Price Channel

Lmp Automotive and Axcella Health Volatility Contrast

   Predicted Return Density   

Pair Trading with Lmp Automotive and Axcella Health

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