Correlation Between Lisi SA and Stef SA

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

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

Diversification Opportunities for Lisi SA and Stef SA

0.59

Correlation Coefficient

Lisi SA  Stef SA

Very weak diversification

The 3 months correlation between Lisi and Stef is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lisi SA and Stef SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stef 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 Stef SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stef SA has no effect on the direction of Lisi SA i.e., Lisi SA and Stef SA go up and down completely randomly.

Pair Corralation between Lisi SA and Stef SA

Assuming the 90 days trading horizon Lisi SA is expected to generate 3.58 times less return on investment than Stef SA. In addition to that, Lisi SA is 1.03 times more volatile than Stef SA. It trades about 0.01 of its total potential returns per unit of risk. Stef SA is currently generating about 0.04 per unit of volatility. If you would invest  11,515  in Stef SA on October 2, 2024 and sell it today you would earn a total of  1,445  from holding Stef SA or generate 12.55% return on investment over 90 days.

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

Lisi SA  vs.  Stef SA

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 weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stef SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lisi SA and Stef SA

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

The idea behind Lisi SA and Stef 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.