Correlation Between 4Mass SA and LSI Software

Can any of the company-specific risk be diversified away by investing in both 4Mass SA and LSI Software 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 4Mass SA and LSI Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 4Mass SA and LSI Software SA, you can compare the effects of market volatilities on 4Mass SA and LSI Software 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 4Mass SA with a short position of LSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4Mass SA and LSI Software.

Diversification Opportunities for 4Mass SA and LSI Software

-0.44

Correlation Coefficient

4Mass SA  LSI Software

Very good diversification

The 3 months correlation between 4Mass and LSI is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding 4Mass SA and LSI Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Software SA and 4Mass 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 4Mass SA are associated (or correlated) with LSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Software SA has no effect on the direction of 4Mass SA i.e., 4Mass SA and LSI Software go up and down completely randomly.

Pair Corralation between 4Mass SA and LSI Software

Assuming the 90 days trading horizon 4Mass SA is expected to generate 3.61 times less return on investment than LSI Software. But when comparing it to its historical volatility, 4Mass SA is 1.59 times less risky than LSI Software. It trades about 0.02 of its potential returns per unit of risk. LSI Software SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,600  in LSI Software SA on December 20, 2024 and sell it today you would earn a total of  80.00  from holding LSI Software SA or generate 5.0% return on investment over 90 days.

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

4Mass SA  vs.  LSI Software SA

4Mass SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 4Mass SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, 4Mass SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

LSI Software SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LSI Software SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LSI Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with 4Mass SA and LSI Software

The main advantage of trading using opposite 4Mass SA and LSI Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4Mass SA position performs unexpectedly, LSI Software 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 LSI Software will offset losses from the drop in LSI Software's long position.

The idea behind 4Mass SA and LSI Software 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.

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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.