Correlation Between Lagardere SCA and Select International

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

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

Diversification Opportunities for Lagardere SCA and Select International

0.83

Correlation Coefficient

Lagardere SCA  Select International

Very poor diversification

The 3 months correlation between Lagardere and Select is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lagardere SCA and Select International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select International and Lagardere SCA 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 Lagardere SCA are associated (or correlated) with Select International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select International has no effect on the direction of Lagardere SCA i.e., Lagardere SCA and Select International go up and down completely randomly.

Pair Corralation between Lagardere SCA and Select International

Assuming the 90 days trading horizon Lagardere SCA is expected to under-perform the Select International. But the stock apears to be less risky and, when comparing its historical volatility, Lagardere SCA is 1.02 times less risky than Select International. The stock trades about -0.25 of its potential returns per unit of risk. The Select International Equity is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,057  in Select International Equity on January 25, 2024 and sell it today you would lose (17.00) from holding Select International Equity or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Lagardere SCA  vs.  Select International Equity

Lagardere SCA

Risk-Adjusted Performance

16 of 100

Solid

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

Select International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Select International Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Select International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lagardere SCA and Select International

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

The idea behind Lagardere SCA and Select International Equity 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.