Correlation Between Lisi SA and Interparfums

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

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

Diversification Opportunities for Lisi SA and Interparfums

0.89

Correlation Coefficient

Lisi SA  Interparfums

Very poor diversification

The 3 months correlation between Lisi and Interparfums is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lisi SA and Interparfums SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interparfums 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 Interparfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interparfums SA has no effect on the direction of Lisi SA i.e., Lisi SA and Interparfums go up and down completely randomly.

Pair Corralation between Lisi SA and Interparfums

Assuming the 90 days trading horizon Lisi SA is expected to generate 0.83 times more return on investment than Interparfums. However, Lisi SA is 1.21 times less risky than Interparfums. It trades about 0.01 of its potential returns per unit of risk. Interparfums SA is currently generating about -0.01 per unit of risk. If you would invest  2,182  in Lisi SA on September 26, 2024 and sell it today you would lose (22.00) from holding Lisi SA or give up 1.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.68%
Values	Daily Returns

Lisi SA  vs.  Interparfums SA

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.

Interparfums SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interparfums SA 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.

Pair Trading with Lisi SA and Interparfums

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

The idea behind Lisi SA and Interparfums 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.