Correlation Between Leonardo Spa and Safran SA
Can any of the company-specific risk be diversified away by investing in both Leonardo Spa and Safran 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 Leonardo Spa and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leonardo Spa and Safran SA, you can compare the effects of market volatilities on Leonardo Spa and Safran 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 Leonardo Spa with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo Spa and Safran SA.
Diversification Opportunities for Leonardo Spa and Safran SA
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leonardo and Safran is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo Spa and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA and Leonardo Spa 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 Leonardo Spa are associated (or correlated) with Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Leonardo Spa i.e., Leonardo Spa and Safran SA go up and down completely randomly.
Pair Corralation between Leonardo Spa and Safran SA
Assuming the 90 days horizon Leonardo Spa is expected to generate 3.52 times more return on investment than Safran SA. However, Leonardo Spa is 3.52 times more volatile than Safran SA. It trades about 0.21 of its potential returns per unit of risk. Safran SA is currently generating about 0.66 per unit of risk. If you would invest 2,804 in Leonardo Spa on November 3, 2024 and sell it today you would earn a total of 345.00 from holding Leonardo Spa or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Leonardo Spa vs. Safran SA
Performance |
| Timeline |
| Leonardo Spa |
| Safran SA |
Leonardo Spa and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo Spa and Safran SA
The main advantage of trading using opposite Leonardo Spa and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo Spa position performs unexpectedly, Safran 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 Safran SA will offset losses from the drop in Safran SA's long position.| Leonardo Spa vs. Kontoor Brands | Leonardo Spa vs. Treasury Wine Estates | Leonardo Spa vs. Ralph Lauren Corp | Leonardo Spa vs. Crimson Wine |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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