Correlation Between Leonardo DRS and Colas SA

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

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

Diversification Opportunities for Leonardo DRS and Colas SA

0.66

Correlation Coefficient

Leonardo DRS  Colas SA

Poor diversification

The 3 months correlation between Leonardo and Colas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo DRS Common and Colas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colas SA and Leonardo DRS 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 Leonardo DRS Common are associated (or correlated) with Colas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colas SA has no effect on the direction of Leonardo DRS i.e., Leonardo DRS and Colas SA go up and down completely randomly.

Pair Corralation between Leonardo DRS and Colas SA

If you would invest  1,899  in Leonardo DRS Common on January 25, 2024 and sell it today you would earn a total of  232.00  from holding Leonardo DRS Common or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.81%
Values	Daily Returns

Leonardo DRS Common  vs.  Colas SA

Leonardo DRS Common

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo DRS Common are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leonardo DRS may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Leonardo DRS and Colas SA

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

The idea behind Leonardo DRS Common and Colas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.