Correlation Between Adocia and Lectra SA

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

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

Diversification Opportunities for Adocia and Lectra SA

-0.8

Correlation Coefficient

Adocia  Lectra SA

Pay attention - limited upside

The 3 months correlation between Adocia and Lectra is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Adocia and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and Adocia 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 Adocia are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of Adocia i.e., Adocia and Lectra SA go up and down completely randomly.

Pair Corralation between Adocia and Lectra SA

Assuming the 90 days trading horizon Adocia is expected to generate 2.28 times more return on investment than Lectra SA. However, Adocia is 2.28 times more volatile than Lectra SA. It trades about 0.09 of its potential returns per unit of risk. Lectra SA is currently generating about 0.01 per unit of risk. If you would invest  582.00  in Adocia on September 3, 2024 and sell it today you would earn a total of  168.00  from holding Adocia or generate 28.87% return on investment over 90 days.

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

Adocia  vs.  Lectra SA

Adocia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adocia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adocia sustained solid returns over the last few months and may actually be approaching a breakup point.

Lectra SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Adocia and Lectra SA

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

The idea behind Adocia and Lectra 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.