Correlation Between Linedata Services and FNP Technologies

Can any of the company-specific risk be diversified away by investing in both Linedata Services and FNP Technologies 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 FNP Technologies 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 FNP Technologies SA, you can compare the effects of market volatilities on Linedata Services and FNP Technologies 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 FNP Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linedata Services and FNP Technologies.

Diversification Opportunities for Linedata Services and FNP Technologies

-0.57

Correlation Coefficient

Linedata Services  FNP Technologies

Excellent diversification

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

Pair Corralation between Linedata Services and FNP Technologies

Assuming the 90 days trading horizon Linedata Services SA is expected to generate 0.33 times more return on investment than FNP Technologies. However, Linedata Services SA is 3.06 times less risky than FNP Technologies. It trades about 0.09 of its potential returns per unit of risk. FNP Technologies SA is currently generating about -0.04 per unit of risk. If you would invest  5,306  in Linedata Services SA on September 4, 2024 and sell it today you would earn a total of  2,374  from holding Linedata Services SA or generate 44.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Linedata Services SA  vs.  FNP Technologies SA

Linedata Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linedata Services may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FNP Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNP Technologies SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Linedata Services and FNP Technologies

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

The idea behind Linedata Services SA and FNP Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.