Correlation Between Mersen SA and Linedata Services

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

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

Diversification Opportunities for Mersen SA and Linedata Services

-0.32

Correlation Coefficient

Mersen SA  Linedata Services

Very good diversification

The 3 months correlation between Mersen and Linedata is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mersen SA and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata Services and Mersen 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 Mersen SA are associated (or correlated) with Linedata Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linedata Services has no effect on the direction of Mersen SA i.e., Mersen SA and Linedata Services go up and down completely randomly.

Pair Corralation between Mersen SA and Linedata Services

Assuming the 90 days trading horizon Mersen SA is expected to under-perform the Linedata Services. In addition to that, Mersen SA is 1.14 times more volatile than Linedata Services SA. It trades about -0.04 of its total potential returns per unit of risk. Linedata Services SA is currently generating about 0.09 per unit of volatility. If you would invest  4,195  in Linedata Services SA on September 11, 2024 and sell it today you would earn a total of  4,005  from holding Linedata Services SA or generate 95.47% return on investment over 90 days.

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

Mersen SA  vs.  Linedata Services SA

Mersen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mersen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Linedata Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linedata Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mersen SA and Linedata Services

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

The idea behind Mersen SA and Linedata Services 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.