Correlation Between Lectra SA and Vetoquinol

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

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

Diversification Opportunities for Lectra SA and Vetoquinol

0.38

Correlation Coefficient

Lectra SA  Vetoquinol

Weak diversification

The 3 months correlation between Lectra and Vetoquinol is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lectra SA and Vetoquinol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vetoquinol and Lectra 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 Lectra SA are associated (or correlated) with Vetoquinol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vetoquinol has no effect on the direction of Lectra SA i.e., Lectra SA and Vetoquinol go up and down completely randomly.

Pair Corralation between Lectra SA and Vetoquinol

Assuming the 90 days trading horizon Lectra SA is expected to generate 1.45 times more return on investment than Vetoquinol. However, Lectra SA is 1.45 times more volatile than Vetoquinol. It trades about 0.01 of its potential returns per unit of risk. Vetoquinol is currently generating about -0.16 per unit of risk. If you would invest  2,760  in Lectra SA on September 4, 2024 and sell it today you would lose (10.00) from holding Lectra SA or give up 0.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Lectra SA  vs.  Vetoquinol

Lectra SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vetoquinol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vetoquinol 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 basic 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 Lectra SA and Vetoquinol

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

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