Correlation Between Prodways Group and Societe LDC

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

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

Diversification Opportunities for Prodways Group and Societe LDC

0.58

Correlation Coefficient

Prodways Group  Societe LDC

Very weak diversification

The 3 months correlation between Prodways and Societe is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Prodways Group SA and Societe LDC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe LDC SA and Prodways Group 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 Prodways Group SA are associated (or correlated) with Societe LDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societe LDC SA has no effect on the direction of Prodways Group i.e., Prodways Group and Societe LDC go up and down completely randomly.

Pair Corralation between Prodways Group and Societe LDC

Assuming the 90 days trading horizon Prodways Group SA is expected to under-perform the Societe LDC. In addition to that, Prodways Group is 1.99 times more volatile than Societe LDC SA. It trades about -0.12 of its total potential returns per unit of risk. Societe LDC SA is currently generating about 0.04 per unit of volatility. If you would invest  4,962  in Societe LDC SA on September 5, 2024 and sell it today you would earn a total of  1,596  from holding Societe LDC SA or generate 32.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Prodways Group SA  vs.  Societe LDC SA

Prodways Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prodways Group 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 technical and 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.

Societe LDC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Societe LDC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Prodways Group and Societe LDC

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

The idea behind Prodways Group SA and Societe LDC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.