Correlation Between Lennox International and Compagnie

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

By analyzing existing cross correlation between Lennox International and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Lennox International and Compagnie 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 Lennox International with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Compagnie.

Diversification Opportunities for Lennox International and Compagnie

0.76

Correlation Coefficient

Lennox International  Compagnie

Poor diversification

The 3 months correlation between Lennox and Compagnie is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Lennox International 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 Lennox International are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Lennox International i.e., Lennox International and Compagnie go up and down completely randomly.

Pair Corralation between Lennox International and Compagnie

Considering the 90-day investment horizon Lennox International is expected to generate 0.67 times more return on investment than Compagnie. However, Lennox International is 1.5 times less risky than Compagnie. It trades about 0.12 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.08 per unit of risk. If you would invest  23,462  in Lennox International on September 20, 2024 and sell it today you would earn a total of  40,370  from holding Lennox International or generate 172.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.19%
Values	Daily Returns

Lennox International  vs.  Compagnie de Saint Gobain

Lennox International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lennox International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Lennox International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Compagnie de Saint

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Compagnie is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lennox International and Compagnie

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

The idea behind Lennox International and Compagnie de Saint Gobain 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.