Correlation Between Air France and Lexibook Linguistic

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

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

Diversification Opportunities for Air France and Lexibook Linguistic

0.48

Correlation Coefficient

Air France  Lexibook Linguistic

Very weak diversification

The 3 months correlation between Air and Lexibook is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Lexibook Linguistic Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexibook Linguistic and Air France 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 Air France KLM SA are associated (or correlated) with Lexibook Linguistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexibook Linguistic has no effect on the direction of Air France i.e., Air France and Lexibook Linguistic go up and down completely randomly.

Pair Corralation between Air France and Lexibook Linguistic

Assuming the 90 days horizon Air France is expected to generate 1.34 times less return on investment than Lexibook Linguistic. In addition to that, Air France is 1.3 times more volatile than Lexibook Linguistic Electronic. It trades about 0.07 of its total potential returns per unit of risk. Lexibook Linguistic Electronic is currently generating about 0.13 per unit of volatility. If you would invest  400.00  in Lexibook Linguistic Electronic on December 22, 2024 and sell it today you would earn a total of  118.00  from holding Lexibook Linguistic Electronic or generate 29.5% return on investment over 90 days.

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

Air France KLM SA  vs.  Lexibook Linguistic Electronic

Air France KLM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air France sustained solid returns over the last few months and may actually be approaching a breakup point.

Lexibook Linguistic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lexibook Linguistic Electronic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Lexibook Linguistic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air France and Lexibook Linguistic

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

The idea behind Air France KLM SA and Lexibook Linguistic Electronic 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.