Correlation Between Legrand SA and Lixil Group

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

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

Diversification Opportunities for Legrand SA and Lixil Group

0.0

Correlation Coefficient

Legrand SA  Lixil Group

Pay attention - limited upside

The 3 months correlation between Legrand and Lixil is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group Corp and Legrand 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 Legrand SA ADR are associated (or correlated) with Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Legrand SA i.e., Legrand SA and Lixil Group go up and down completely randomly.

Pair Corralation between Legrand SA and Lixil Group

Assuming the 90 days horizon Legrand SA ADR is expected to under-perform the Lixil Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Legrand SA ADR is 1.32 times less risky than Lixil Group. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Lixil Group Corp is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  2,288  in Lixil Group Corp on October 5, 2024 and sell it today you would lose (93.00) from holding Lixil Group Corp or give up 4.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Legrand SA ADR  vs.  Lixil Group Corp

Legrand SA ADR

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Legrand SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lixil Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lixil Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lixil Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legrand SA and Lixil Group

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

The idea behind Legrand SA ADR and Lixil Group Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.