Correlation Between LPP SA and Esotiq Henderson

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

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

Diversification Opportunities for LPP SA and Esotiq Henderson

0.12

Correlation Coefficient

LPP SA  Esotiq Henderson

Average diversification

The 3 months correlation between LPP and Esotiq is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding LPP SA and Esotiq Henderson SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esotiq Henderson and LPP 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 LPP SA are associated (or correlated) with Esotiq Henderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esotiq Henderson has no effect on the direction of LPP SA i.e., LPP SA and Esotiq Henderson go up and down completely randomly.

Pair Corralation between LPP SA and Esotiq Henderson

Assuming the 90 days trading horizon LPP SA is expected to generate 0.65 times more return on investment than Esotiq Henderson. However, LPP SA is 1.55 times less risky than Esotiq Henderson. It trades about 0.16 of its potential returns per unit of risk. Esotiq Henderson SA is currently generating about 0.02 per unit of risk. If you would invest  1,384,951  in LPP SA on September 12, 2024 and sell it today you would earn a total of  297,049  from holding LPP SA or generate 21.45% return on investment over 90 days.

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

LPP SA  vs.  Esotiq Henderson SA

LPP SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LPP SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LPP SA reported solid returns over the last few months and may actually be approaching a breakup point.

Esotiq Henderson

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Esotiq Henderson SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Esotiq Henderson is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LPP SA and Esotiq Henderson

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

The idea behind LPP SA and Esotiq Henderson 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.