Correlation Between Linedata Services and Les Hotels
Can any of the company-specific risk be diversified away by investing in both Linedata Services and Les Hotels 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 Linedata Services and Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linedata Services SA and Les Hotels Bav, you can compare the effects of market volatilities on Linedata Services and Les Hotels 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 Linedata Services with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linedata Services and Les Hotels.
Diversification Opportunities for Linedata Services and Les Hotels
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Linedata and Les is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav and Linedata Services 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 Linedata Services SA are associated (or correlated) with Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of Linedata Services i.e., Linedata Services and Les Hotels go up and down completely randomly.
Pair Corralation between Linedata Services and Les Hotels
Assuming the 90 days trading horizon Linedata Services SA is expected to under-perform the Les Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Linedata Services SA is 2.52 times less risky than Les Hotels. The stock trades about -0.02 of its potential returns per unit of risk. The Les Hotels Bav is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,150 in Les Hotels Bav on October 26, 2024 and sell it today you would earn a total of 250.00 from holding Les Hotels Bav or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linedata Services SA vs. Les Hotels Bav
Performance |
| Timeline |
| Linedata Services |
| Les Hotels Bav |
Linedata Services and Les Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linedata Services and Les Hotels
The main advantage of trading using opposite Linedata Services and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linedata Services position performs unexpectedly, Les Hotels 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 Les Hotels will offset losses from the drop in Les Hotels' long position.| Linedata Services vs. Sword Group SE | Linedata Services vs. Lectra SA | Linedata Services vs. Neurones | Linedata Services vs. Aubay Socit Anonyme |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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