Correlation Between Sword Group and Linedata Services

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

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

Diversification Opportunities for Sword Group and Linedata Services

0.9

Correlation Coefficient

Sword Group  Linedata Services

Almost no diversification

The 3 months correlation between Sword and Linedata is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sword Group SE and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata Services and Sword Group 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 Sword Group SE 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 Sword Group i.e., Sword Group and Linedata Services go up and down completely randomly.

Pair Corralation between Sword Group and Linedata Services

Assuming the 90 days trading horizon Sword Group is expected to generate 1.62 times less return on investment than Linedata Services. In addition to that, Sword Group is 1.13 times more volatile than Linedata Services SA. It trades about 0.06 of its total potential returns per unit of risk. Linedata Services SA is currently generating about 0.12 per unit of volatility. If you would invest  7,100  in Linedata Services SA on August 30, 2024 and sell it today you would earn a total of  980.00  from holding Linedata Services SA or generate 13.8% return on investment over 90 days.

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

Sword Group SE  vs.  Linedata Services SA

Sword Group SE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sword Group SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sword Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Linedata Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 9 (%) 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 Sword Group and Linedata Services

The main advantage of trading using opposite Sword Group and Linedata Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sword Group 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 Sword Group SE 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.