Correlation Between Leonardo SpA and Innovative Solutions
Can any of the company-specific risk be diversified away by investing in both Leonardo SpA and Innovative Solutions 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 Innovative Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leonardo SpA ADR and Innovative Solutions and, you can compare the effects of market volatilities on Leonardo SpA and Innovative Solutions 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 Innovative Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo SpA and Innovative Solutions.
Diversification Opportunities for Leonardo SpA and Innovative Solutions
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leonardo and Innovative is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo SpA ADR and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and 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 ADR are associated (or correlated) with Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of Leonardo SpA i.e., Leonardo SpA and Innovative Solutions go up and down completely randomly.
Pair Corralation between Leonardo SpA and Innovative Solutions
Assuming the 90 days horizon Leonardo SpA ADR is expected to generate 1.31 times more return on investment than Innovative Solutions. However, Leonardo SpA is 1.31 times more volatile than Innovative Solutions and. It trades about 0.22 of its potential returns per unit of risk. Innovative Solutions and is currently generating about 0.24 per unit of risk. If you would invest 1,199 in Leonardo SpA ADR on August 31, 2024 and sell it today you would earn a total of 116.00 from holding Leonardo SpA ADR or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leonardo SpA ADR vs. Innovative Solutions and
Performance |
| Timeline |
| Leonardo SpA ADR |
| Innovative Solutions and |
Leonardo SpA and Innovative Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo SpA and Innovative Solutions
The main advantage of trading using opposite Leonardo SpA and Innovative Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo SpA position performs unexpectedly, Innovative Solutions 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 Innovative Solutions will offset losses from the drop in Innovative Solutions' long position.| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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