Correlation Between Linedata Services and Bourse Direct

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

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

Diversification Opportunities for Linedata Services and Bourse Direct

-0.47

Correlation Coefficient

Linedata Services  Bourse Direct

Very good diversification

The 3 months correlation between Linedata and Bourse is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Bourse Direct SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bourse Direct SA and Linedata Services 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 Linedata Services SA are associated (or correlated) with Bourse Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bourse Direct SA has no effect on the direction of Linedata Services i.e., Linedata Services and Bourse Direct go up and down completely randomly.

Pair Corralation between Linedata Services and Bourse Direct

Assuming the 90 days trading horizon Linedata Services SA is expected to under-perform the Bourse Direct. But the stock apears to be less risky and, when comparing its historical volatility, Linedata Services SA is 1.3 times less risky than Bourse Direct. The stock trades about -0.12 of its potential returns per unit of risk. The Bourse Direct SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  440.00  in Bourse Direct SA on September 5, 2024 and sell it today you would lose (16.00) from holding Bourse Direct SA or give up 3.64% of portfolio value over 90 days.

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

Linedata Services SA  vs.  Bourse Direct SA

Linedata Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linedata Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Bourse Direct SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bourse Direct 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 fundamental 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 Linedata Services and Bourse Direct

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

The idea behind Linedata Services SA and Bourse Direct 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.