Correlation Between Dromeas SA and N Leventeris

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

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

Diversification Opportunities for Dromeas SA and N Leventeris

-0.35

Correlation Coefficient

Dromeas SA  N Leventeris

Very good diversification

The 3 months correlation between Dromeas and LEBEP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dromeas SA and N Leventeris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N Leventeris SA and Dromeas 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 Dromeas SA are associated (or correlated) with N Leventeris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N Leventeris SA has no effect on the direction of Dromeas SA i.e., Dromeas SA and N Leventeris go up and down completely randomly.

Pair Corralation between Dromeas SA and N Leventeris

Assuming the 90 days trading horizon Dromeas SA is expected to generate 1.09 times less return on investment than N Leventeris. But when comparing it to its historical volatility, Dromeas SA is 3.04 times less risky than N Leventeris. It trades about 0.13 of its potential returns per unit of risk. N Leventeris SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25.00  in N Leventeris SA on October 9, 2024 and sell it today you would earn a total of  1.00  from holding N Leventeris SA or generate 4.0% return on investment over 90 days.

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

Dromeas SA  vs.  N Leventeris SA

Dromeas SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dromeas SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dromeas SA sustained solid returns over the last few months and may actually be approaching a breakup point.

N Leventeris SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in N Leventeris SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N Leventeris sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dromeas SA and N Leventeris

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

The idea behind Dromeas SA and N Leventeris 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.