Correlation Between Lisi SA and Manitou BF

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

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

Diversification Opportunities for Lisi SA and Manitou BF

0.72

Correlation Coefficient

Lisi SA  Manitou BF

Poor diversification

The 3 months correlation between Lisi and Manitou is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lisi SA and Manitou BF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitou BF SA 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 Manitou BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitou BF SA has no effect on the direction of Lisi SA i.e., Lisi SA and Manitou BF go up and down completely randomly.

Pair Corralation between Lisi SA and Manitou BF

Assuming the 90 days trading horizon Lisi SA is expected to generate 1.34 times less return on investment than Manitou BF. But when comparing it to its historical volatility, Lisi SA is 1.3 times less risky than Manitou BF. It trades about 0.11 of its potential returns per unit of risk. Manitou BF SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Manitou BF SA on October 22, 2024 and sell it today you would earn a total of  248.00  from holding Manitou BF SA or generate 14.59% return on investment over 90 days.

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

Lisi SA  vs.  Manitou BF SA

Lisi SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lisi SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Lisi SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Manitou BF SA

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manitou BF SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Manitou BF sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lisi SA and Manitou BF

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

The idea behind Lisi SA and Manitou BF 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.