Correlation Between LSI Software and MLP Group

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

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

Diversification Opportunities for LSI Software and MLP Group

0.56

Correlation Coefficient

LSI Software  MLP Group

Very weak diversification

The 3 months correlation between LSI and MLP is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding LSI Software SA and MLP Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MLP Group SA and LSI Software 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 LSI Software SA are associated (or correlated) with MLP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MLP Group SA has no effect on the direction of LSI Software i.e., LSI Software and MLP Group go up and down completely randomly.

Pair Corralation between LSI Software and MLP Group

Assuming the 90 days trading horizon LSI Software is expected to generate 3.24 times less return on investment than MLP Group. In addition to that, LSI Software is 1.07 times more volatile than MLP Group SA. It trades about 0.05 of its total potential returns per unit of risk. MLP Group SA is currently generating about 0.18 per unit of volatility. If you would invest  7,040  in MLP Group SA on December 22, 2024 and sell it today you would earn a total of  1,900  from holding MLP Group SA or generate 26.99% return on investment over 90 days.

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

LSI Software SA  vs.  MLP Group SA

LSI Software SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LSI Software SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LSI Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MLP Group SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MLP Group SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MLP Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LSI Software and MLP Group

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

The idea behind LSI Software SA and MLP Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.