Correlation Between Lectra SA and IT Link

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

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

Diversification Opportunities for Lectra SA and IT Link

-0.02

Correlation Coefficient

Lectra SA  IT Link

Good diversification

The 3 months correlation between Lectra and ALITL is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lectra SA and IT Link in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IT Link and Lectra 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 Lectra SA are associated (or correlated) with IT Link. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IT Link has no effect on the direction of Lectra SA i.e., Lectra SA and IT Link go up and down completely randomly.

Pair Corralation between Lectra SA and IT Link

Assuming the 90 days trading horizon Lectra SA is expected to under-perform the IT Link. In addition to that, Lectra SA is 1.04 times more volatile than IT Link. It trades about -0.01 of its total potential returns per unit of risk. IT Link is currently generating about 0.02 per unit of volatility. If you would invest  2,385  in IT Link on September 17, 2024 and sell it today you would earn a total of  345.00  from holding IT Link or generate 14.47% return on investment over 90 days.

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

Lectra SA  vs.  IT Link

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.

IT Link

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IT Link are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IT Link may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lectra SA and IT Link

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

The idea behind Lectra SA and IT Link 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..