Correlation Between Leonardo Spa and Thales SA

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

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

Diversification Opportunities for Leonardo Spa and Thales SA

-0.47

Correlation Coefficient

Leonardo Spa  Thales SA

Very good diversification

The 3 months correlation between Leonardo and Thales is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo Spa and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and Leonardo Spa 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 Leonardo Spa are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Leonardo Spa i.e., Leonardo Spa and Thales SA go up and down completely randomly.

Pair Corralation between Leonardo Spa and Thales SA

Assuming the 90 days horizon Leonardo Spa is expected to generate 1.62 times more return on investment than Thales SA. However, Leonardo Spa is 1.62 times more volatile than Thales SA. It trades about -0.11 of its potential returns per unit of risk. Thales SA is currently generating about -0.18 per unit of risk. If you would invest  2,834  in Leonardo Spa on October 5, 2024 and sell it today you would lose (239.00) from holding Leonardo Spa or give up 8.43% of portfolio value over 90 days.

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

Leonardo Spa  vs.  Thales SA

Leonardo Spa

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo Spa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Leonardo Spa reported solid returns over the last few months and may actually be approaching a breakup point.

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Leonardo Spa and Thales SA

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

The idea behind Leonardo Spa and Thales 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.