Correlation Between Bonduelle SCA and Lectra SA

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

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

Diversification Opportunities for Bonduelle SCA and Lectra SA

0.25

Correlation Coefficient

Bonduelle SCA  Lectra SA

Modest diversification

The 3 months correlation between Bonduelle and Lectra is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bonduelle SCA and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and Bonduelle 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 Bonduelle SCA are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of Bonduelle SCA i.e., Bonduelle SCA and Lectra SA go up and down completely randomly.

Pair Corralation between Bonduelle SCA and Lectra SA

Assuming the 90 days trading horizon Bonduelle SCA is expected to under-perform the Lectra SA. But the stock apears to be less risky and, when comparing its historical volatility, Bonduelle SCA is 1.5 times less risky than Lectra SA. The stock trades about -0.08 of its potential returns per unit of risk. The Lectra SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,820  in Lectra SA on September 2, 2024 and sell it today you would lose (20.00) from holding Lectra SA or give up 0.71% of portfolio value over 90 days.

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

Bonduelle SCA  vs.  Lectra SA

Bonduelle SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonduelle SCA 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.

Lectra SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lectra SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lectra SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bonduelle SCA and Lectra SA

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

The idea behind Bonduelle SCA and Lectra 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.