Correlation Between Lisi SA and Thales SA

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

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

Diversification Opportunities for Lisi SA and Thales SA

0.74

Correlation Coefficient

Lisi SA  Thales SA

Poor diversification

The 3 months correlation between Lisi and Thales is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lisi SA and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and Lisi 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 Lisi SA are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Lisi SA i.e., Lisi SA and Thales SA go up and down completely randomly.

Pair Corralation between Lisi SA and Thales SA

Assuming the 90 days trading horizon Lisi SA is expected to generate 1.08 times more return on investment than Thales SA. However, Lisi SA is 1.08 times more volatile than Thales SA. It trades about 0.33 of its potential returns per unit of risk. Thales SA is currently generating about 0.13 per unit of risk. If you would invest  2,335  in Lisi SA on February 27, 2024 and sell it today you would earn a total of  460.00  from holding Lisi SA or generate 19.7% return on investment over 90 days.

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

Lisi SA  vs.  Thales SA

Lisi SA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lisi SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Lisi SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Thales SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thales SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lisi SA and Thales SA

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

The idea behind Lisi SA and Thales 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.