Correlation Between General Commercial and Lavipharm

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

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

Diversification Opportunities for General Commercial and Lavipharm

0.57

Correlation Coefficient

General Commercial  Lavipharm

Very weak diversification

The 3 months correlation between General and Lavipharm is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Commercial Industrial and Lavipharm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavipharm SA and General Commercial 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 General Commercial Industrial are associated (or correlated) with Lavipharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavipharm SA has no effect on the direction of General Commercial i.e., General Commercial and Lavipharm go up and down completely randomly.

Pair Corralation between General Commercial and Lavipharm

Assuming the 90 days trading horizon General Commercial Industrial is expected to generate 1.03 times more return on investment than Lavipharm. However, General Commercial is 1.03 times more volatile than Lavipharm SA. It trades about 0.0 of its potential returns per unit of risk. Lavipharm SA is currently generating about -0.07 per unit of risk. If you would invest  134.00  in General Commercial Industrial on September 14, 2024 and sell it today you would lose (1.00) from holding General Commercial Industrial or give up 0.75% of portfolio value over 90 days.

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

General Commercial Industrial  vs.  Lavipharm SA

General Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lavipharm SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lavipharm SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with General Commercial and Lavipharm

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

The idea behind General Commercial Industrial and Lavipharm 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.