Correlation Between Lagardere SCA and Sodexo SA

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

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

Diversification Opportunities for Lagardere SCA and Sodexo SA

-0.43

Correlation Coefficient

Lagardere SCA  Sodexo SA

Very good diversification

The 3 months correlation between Lagardere and Sodexo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lagardere SCA and Sodexo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo SA and Lagardere SCA 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 Lagardere SCA are associated (or correlated) with Sodexo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo SA has no effect on the direction of Lagardere SCA i.e., Lagardere SCA and Sodexo SA go up and down completely randomly.

Pair Corralation between Lagardere SCA and Sodexo SA

Assuming the 90 days trading horizon Lagardere SCA is expected to generate 1.26 times less return on investment than Sodexo SA. But when comparing it to its historical volatility, Lagardere SCA is 1.02 times less risky than Sodexo SA. It trades about 0.04 of its potential returns per unit of risk. Sodexo SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,787  in Sodexo SA on October 7, 2024 and sell it today you would earn a total of  1,008  from holding Sodexo SA or generate 14.85% return on investment over 90 days.

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

Lagardere SCA  vs.  Sodexo SA

Lagardere SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lagardere SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sodexo SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sodexo SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sodexo SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lagardere SCA and Sodexo SA

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

The idea behind Lagardere SCA and Sodexo 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.