Correlation Between Linedata Services and Lectra SA

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

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

Diversification Opportunities for Linedata Services and Lectra SA

-0.21

Correlation Coefficient

Linedata Services  Lectra SA

Very good diversification

The 3 months correlation between Linedata and Lectra is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and Linedata Services 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 Linedata Services SA are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of Linedata Services i.e., Linedata Services and Lectra SA go up and down completely randomly.

Pair Corralation between Linedata Services and Lectra SA

Assuming the 90 days trading horizon Linedata Services SA is expected to under-perform the Lectra SA. But the stock apears to be less risky and, when comparing its historical volatility, Linedata Services SA is 1.74 times less risky than Lectra SA. The stock trades about -0.04 of its potential returns per unit of risk. The Lectra SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,550  in Lectra SA on September 1, 2024 and sell it today you would earn a total of  250.00  from holding Lectra SA or generate 9.8% return on investment over 90 days.

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

Linedata Services SA  vs.  Lectra SA

Linedata Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linedata Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Lectra SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lectra SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lectra 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 Linedata Services and Lectra SA

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

The idea behind Linedata Services SA and Lectra 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.