Correlation Between Leons Furniture and ISign Media

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

By analyzing existing cross correlation between Leons Furniture Limited and iSign Media Solutions, you can compare the effects of market volatilities on Leons Furniture and ISign Media 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 Leons Furniture with a short position of ISign Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and ISign Media.

Diversification Opportunities for Leons Furniture and ISign Media

0.04

Correlation Coefficient

Leons Furniture  ISign Media

Significant diversification

The 3 months correlation between Leons and ISign is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and iSign Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSign Media Solutions and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with ISign Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSign Media Solutions has no effect on the direction of Leons Furniture i.e., Leons Furniture and ISign Media go up and down completely randomly.

Pair Corralation between Leons Furniture and ISign Media

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the ISign Media. In addition to that, Leons Furniture is 1.9 times more volatile than iSign Media Solutions. It trades about -0.07 of its total potential returns per unit of risk. iSign Media Solutions is currently generating about 0.0 per unit of volatility. If you would invest  1,389  in iSign Media Solutions on September 1, 2024 and sell it today you would lose (3.00) from holding iSign Media Solutions or give up 0.22% of portfolio value over 90 days.

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

Leons Furniture Limited  vs.  iSign Media Solutions

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

iSign Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iSign Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ISign Media is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Leons Furniture and ISign Media

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

The idea behind Leons Furniture Limited and iSign Media Solutions 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.