Correlation Between Lisi SA and Innelec Multimedia

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

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

Diversification Opportunities for Lisi SA and Innelec Multimedia

0.24

Correlation Coefficient

Lisi SA  Innelec Multimedia

Modest diversification

The 3 months correlation between Lisi and Innelec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lisi SA and Innelec Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innelec Multimedia and Lisi 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 Lisi SA are associated (or correlated) with Innelec Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innelec Multimedia has no effect on the direction of Lisi SA i.e., Lisi SA and Innelec Multimedia go up and down completely randomly.

Pair Corralation between Lisi SA and Innelec Multimedia

Assuming the 90 days trading horizon Lisi SA is expected to generate 0.47 times more return on investment than Innelec Multimedia. However, Lisi SA is 2.13 times less risky than Innelec Multimedia. It trades about 0.03 of its potential returns per unit of risk. Innelec Multimedia is currently generating about 0.0 per unit of risk. If you would invest  1,983  in Lisi SA on October 13, 2024 and sell it today you would earn a total of  382.00  from holding Lisi SA or generate 19.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Lisi SA  vs.  Innelec Multimedia

Lisi SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Innelec Multimedia

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Lisi SA and Innelec Multimedia

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

The idea behind Lisi SA and Innelec Multimedia 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.