Correlation Between Latcore SA and Bollore SA

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

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

Diversification Opportunities for Latcore SA and Bollore SA

0.62

Correlation Coefficient

Latcore SA  Bollore SA

Poor diversification

The 3 months correlation between Latcore and Bollore is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Latcore SA and Bollore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bollore SA and Latcore 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 Latcore SA are associated (or correlated) with Bollore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bollore SA has no effect on the direction of Latcore SA i.e., Latcore SA and Bollore SA go up and down completely randomly.

Pair Corralation between Latcore SA and Bollore SA

Assuming the 90 days trading horizon Latcore SA is expected to generate 5.9 times more return on investment than Bollore SA. However, Latcore SA is 5.9 times more volatile than Bollore SA. It trades about 0.07 of its potential returns per unit of risk. Bollore SA is currently generating about -0.01 per unit of risk. If you would invest  0.69  in Latcore SA on September 5, 2024 and sell it today you would earn a total of  0.12  from holding Latcore SA or generate 17.39% return on investment over 90 days.

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

Latcore SA  vs.  Bollore SA

Latcore SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Latcore SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Latcore SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Bollore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bollore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Bollore 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 Latcore SA and Bollore SA

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

The idea behind Latcore SA and Bollore 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.