Correlation Between LSI Software and UniCredit SpA

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Can any of the company-specific risk be diversified away by investing in both LSI Software and UniCredit SpA 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 UniCredit SpA 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 UniCredit SpA, you can compare the effects of market volatilities on LSI Software and UniCredit SpA 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 UniCredit SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LSI Software and UniCredit SpA.

Diversification Opportunities for LSI Software and UniCredit SpA

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between LSI and UniCredit is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding LSI Software SA and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA has no effect on the direction of LSI Software i.e., LSI Software and UniCredit SpA go up and down completely randomly.

Pair Corralation between LSI Software and UniCredit SpA

Assuming the 90 days trading horizon LSI Software SA is expected to generate 1.37 times more return on investment than UniCredit SpA. However, LSI Software is 1.37 times more volatile than UniCredit SpA. It trades about 0.15 of its potential returns per unit of risk. UniCredit SpA is currently generating about 0.06 per unit of risk. If you would invest  1,500  in LSI Software SA on September 24, 2024 and sell it today you would earn a total of  100.00  from holding LSI Software SA or generate 6.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

LSI Software SA  vs.  UniCredit SpA

 Performance 
       Timeline  
LSI Software SA 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in LSI Software SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, LSI Software is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
UniCredit SpA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days UniCredit SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, UniCredit SpA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

LSI Software and UniCredit SpA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LSI Software and UniCredit SpA

The main advantage of trading using opposite LSI Software and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LSI Software position performs unexpectedly, UniCredit SpA 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 UniCredit SpA will offset losses from the drop in UniCredit SpA's long position.
The idea behind LSI Software SA and UniCredit SpA 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.
Check out your portfolio center.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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