Correlation Between North American and Linedata Services

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

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

Diversification Opportunities for North American and Linedata Services

0.72

Correlation Coefficient

North American  Linedata Services

Poor diversification

The 3 months correlation between North and Linedata is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata Services and North American 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 North American Construction 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 North American i.e., North American and Linedata Services go up and down completely randomly.

Pair Corralation between North American and Linedata Services

Assuming the 90 days horizon North American Construction is expected to under-perform the Linedata Services. In addition to that, North American is 1.56 times more volatile than Linedata Services SA. It trades about -0.14 of its total potential returns per unit of risk. Linedata Services SA is currently generating about -0.02 per unit of volatility. If you would invest  8,100  in Linedata Services SA on December 23, 2024 and sell it today you would lose (240.00) from holding Linedata Services SA or give up 2.96% of portfolio value over 90 days.

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

North American Construction  vs.  Linedata Services SA

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Linedata Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linedata Services SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with North American and Linedata Services

The main advantage of trading using opposite North American and Linedata Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Construction 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.