Correlation Between Superior Plus and LOral SA

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

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

Diversification Opportunities for Superior Plus and LOral SA

0.59

Correlation Coefficient

Superior Plus  LOral SA

Very weak diversification

The 3 months correlation between Superior and LOral is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA and Superior Plus 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 Superior Plus Corp are associated (or correlated) with LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Superior Plus i.e., Superior Plus and LOral SA go up and down completely randomly.

Pair Corralation between Superior Plus and LOral SA

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the LOral SA. In addition to that, Superior Plus is 1.41 times more volatile than LOral SA. It trades about -0.02 of its total potential returns per unit of risk. LOral SA is currently generating about 0.16 per unit of volatility. If you would invest  34,455  in LOral SA on October 27, 2024 and sell it today you would earn a total of  1,385  from holding LOral SA or generate 4.02% return on investment over 90 days.

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

Superior Plus Corp  vs.  LOral SA

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LOral SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOral SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LOral SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Superior Plus and LOral SA

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

The idea behind Superior Plus Corp and LOral 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.