Correlation Between Leonardo SpA and Thales SA
Can any of the company-specific risk be diversified away by investing in both Leonardo SpA and Thales 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 Thales SA 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 Thales SA ADR, you can compare the effects of market volatilities on Leonardo SpA and Thales 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo SpA and Thales SA.
Diversification Opportunities for Leonardo SpA and Thales SA
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Leonardo and Thales is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo SpA ADR and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of Leonardo SpA i.e., Leonardo SpA and Thales SA go up and down completely randomly.
Pair Corralation between Leonardo SpA and Thales SA
Assuming the 90 days horizon Leonardo SpA ADR is expected to generate 1.07 times more return on investment than Thales SA. However, Leonardo SpA is 1.07 times more volatile than Thales SA ADR. It trades about 0.22 of its potential returns per unit of risk. Thales SA ADR is currently generating about -0.16 per unit of risk. If you would invest 1,194 in Leonardo SpA ADR on August 27, 2024 and sell it today you would earn a total of 114.00 from holding Leonardo SpA ADR or generate 9.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leonardo SpA ADR vs. Thales SA ADR
Performance |
| Timeline |
| Leonardo SpA ADR |
| Thales SA ADR |
Leonardo SpA and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo SpA and Thales SA
The main advantage of trading using opposite Leonardo SpA and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo SpA position performs unexpectedly, Thales 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 Thales SA will offset losses from the drop in Thales SA's long position.| Leonardo SpA vs. Moog Inc | Leonardo SpA vs. BAE Systems PLC | Leonardo SpA vs. Park Electrochemical | Leonardo SpA vs. Triumph Group |
| Thales SA vs. Moog Inc | Thales SA vs. BAE Systems PLC | Thales SA vs. Park Electrochemical | Thales SA vs. Triumph Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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