Correlation Between Bains Mer and Lisi SA

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

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

Diversification Opportunities for Bains Mer and Lisi SA

0.69

Correlation Coefficient

Bains Mer  Lisi SA

Poor diversification

The 3 months correlation between Bains and Lisi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bains Mer Monaco and Lisi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisi SA and Bains Mer 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 Bains Mer Monaco are associated (or correlated) with Lisi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisi SA has no effect on the direction of Bains Mer i.e., Bains Mer and Lisi SA go up and down completely randomly.

Pair Corralation between Bains Mer and Lisi SA

Assuming the 90 days trading horizon Bains Mer Monaco is expected to under-perform the Lisi SA. In addition to that, Bains Mer is 1.34 times more volatile than Lisi SA. It trades about -0.13 of its total potential returns per unit of risk. Lisi SA is currently generating about 0.11 per unit of volatility. If you would invest  2,105  in Lisi SA on September 27, 2024 and sell it today you would earn a total of  55.00  from holding Lisi SA or generate 2.61% return on investment over 90 days.

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

Bains Mer Monaco  vs.  Lisi SA

Bains Mer Monaco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bains Mer Monaco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lisi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lisi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bains Mer and Lisi SA

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

The idea behind Bains Mer Monaco and Lisi 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.