Correlation Between Evolva Holding and Leclanche

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

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

Diversification Opportunities for Evolva Holding and Leclanche

0.35

Correlation Coefficient

Evolva Holding  Leclanche

Weak diversification

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

Pair Corralation between Evolva Holding and Leclanche

Assuming the 90 days trading horizon Evolva Holding is expected to generate 3.64 times less return on investment than Leclanche. But when comparing it to its historical volatility, Evolva Holding SA is 1.71 times less risky than Leclanche. It trades about 0.11 of its potential returns per unit of risk. Leclanche SA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Leclanche SA on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Leclanche SA or generate 42.86% return on investment over 90 days.

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

Evolva Holding SA  vs.  Leclanche SA

Evolva Holding SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolva Holding SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Evolva Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Leclanche SA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leclanche SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leclanche showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolva Holding and Leclanche

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

The idea behind Evolva Holding SA and Leclanche 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.