Correlation Between Linedata Services and Sword Group

Can any of the company-specific risk be diversified away by investing in both Linedata Services and Sword 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 Linedata Services and Sword Group 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 Sword Group SE, you can compare the effects of market volatilities on Linedata Services and Sword 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 Linedata Services with a short position of Sword Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linedata Services and Sword Group.

Diversification Opportunities for Linedata Services and Sword Group

0.3

Correlation Coefficient

Linedata Services  Sword Group

Weak diversification

The 3 months correlation between Linedata and Sword is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Sword Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sword Group SE 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 Sword Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sword Group SE has no effect on the direction of Linedata Services i.e., Linedata Services and Sword Group go up and down completely randomly.

Pair Corralation between Linedata Services and Sword Group

Assuming the 90 days trading horizon Linedata Services SA is expected to generate 2.18 times more return on investment than Sword Group. However, Linedata Services is 2.18 times more volatile than Sword Group SE. It trades about -0.05 of its potential returns per unit of risk. Sword Group SE is currently generating about -0.19 per unit of risk. If you would invest  8,300  in Linedata Services SA on December 1, 2024 and sell it today you would lose (260.00) from holding Linedata Services SA or give up 3.13% of portfolio value over 90 days.

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

Linedata Services SA  vs.  Sword Group SE

Linedata Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Linedata Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sword Group SE

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Linedata Services SA and Sword Group SE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.