Correlation Between S A P and Lassonde Industries

Can any of the company-specific risk be diversified away by investing in both S A P and Lassonde Industries 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 S A P and Lassonde Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saputo Inc and Lassonde Industries, you can compare the effects of market volatilities on S A P and Lassonde Industries 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 S A P with a short position of Lassonde Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Lassonde Industries.

Diversification Opportunities for S A P and Lassonde Industries

0.44

Correlation Coefficient

S A P  Lassonde Industries

Very weak diversification

The 3 months correlation between SAP and Lassonde is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Lassonde Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lassonde Industries and S A P 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 Saputo Inc are associated (or correlated) with Lassonde Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lassonde Industries has no effect on the direction of S A P i.e., S A P and Lassonde Industries go up and down completely randomly.

Pair Corralation between S A P and Lassonde Industries

Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Lassonde Industries. But the stock apears to be less risky and, when comparing its historical volatility, Saputo Inc is 1.59 times less risky than Lassonde Industries. The stock trades about 0.0 of its potential returns per unit of risk. The Lassonde Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  17,990  in Lassonde Industries on December 30, 2024 and sell it today you would earn a total of  3,310  from holding Lassonde Industries or generate 18.4% return on investment over 90 days.

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

Saputo Inc  vs.  Lassonde Industries

Saputo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, S A P is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lassonde Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lassonde Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Lassonde Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S A P and Lassonde Industries

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

The idea behind Saputo Inc and Lassonde Industries 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.