Correlation Between Meyer Burger and Leclanche

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

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

Diversification Opportunities for Meyer Burger and Leclanche

0.08

Correlation Coefficient

Meyer Burger  Leclanche

Significant diversification

The 3 months correlation between Meyer and Leclanche is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Meyer Burger Tech and Leclanche SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leclanche SA and Meyer Burger 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 Meyer Burger Tech are associated (or correlated) with Leclanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leclanche SA has no effect on the direction of Meyer Burger i.e., Meyer Burger and Leclanche go up and down completely randomly.

Pair Corralation between Meyer Burger and Leclanche

Assuming the 90 days trading horizon Meyer Burger Tech is expected to generate 1.69 times more return on investment than Leclanche. However, Meyer Burger is 1.69 times more volatile than Leclanche SA. It trades about 0.12 of its potential returns per unit of risk. Leclanche SA is currently generating about 0.1 per unit of risk. If you would invest  149.00  in Meyer Burger Tech on September 24, 2024 and sell it today you would earn a total of  92.00  from holding Meyer Burger Tech or generate 61.74% return on investment over 90 days.

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

Meyer Burger Tech  vs.  Leclanche SA

Meyer Burger Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meyer Burger Tech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Meyer Burger showed solid returns over the last few months and may actually be approaching a breakup point.

Leclanche SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leclanche SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leclanche showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meyer Burger and Leclanche

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

The idea behind Meyer Burger Tech and Leclanche 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.