Correlation Between SQLI SA and Lectra SA

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

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

Diversification Opportunities for SQLI SA and Lectra SA

-0.33

Correlation Coefficient

SQLI SA  Lectra SA

Very good diversification

The 3 months correlation between SQLI and Lectra is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding SQLI SA and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and SQLI 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 SQLI SA are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of SQLI SA i.e., SQLI SA and Lectra SA go up and down completely randomly.

Pair Corralation between SQLI SA and Lectra SA

Assuming the 90 days trading horizon SQLI SA is expected to generate 1.84 times more return on investment than Lectra SA. However, SQLI SA is 1.84 times more volatile than Lectra SA. It trades about 0.12 of its potential returns per unit of risk. Lectra SA is currently generating about 0.01 per unit of risk. If you would invest  3,940  in SQLI SA on September 4, 2024 and sell it today you would earn a total of  1,460  from holding SQLI SA or generate 37.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SQLI SA  vs.  Lectra SA

SQLI SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SQLI SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, SQLI SA sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with SQLI SA and Lectra SA

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

The idea behind SQLI SA and Lectra 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.