Correlation Between Neurones and Lectra SA

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

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

Diversification Opportunities for Neurones and Lectra SA

-0.68

Correlation Coefficient

Neurones  Lectra SA

Excellent diversification

The 3 months correlation between Neurones and Lectra is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Neurones and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and Neurones 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 Neurones are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of Neurones i.e., Neurones and Lectra SA go up and down completely randomly.

Pair Corralation between Neurones and Lectra SA

Assuming the 90 days trading horizon Neurones is expected to generate 0.39 times more return on investment than Lectra SA. However, Neurones is 2.56 times less risky than Lectra SA. It trades about 0.08 of its potential returns per unit of risk. Lectra SA is currently generating about 0.01 per unit of risk. If you would invest  4,290  in Neurones on September 3, 2024 and sell it today you would earn a total of  200.00  from holding Neurones or generate 4.66% return on investment over 90 days.

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

Neurones  vs.  Lectra SA

Neurones

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Neurones are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Neurones is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Neurones and Lectra SA

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

The idea behind Neurones and Lectra 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.