Correlation Between LSI Software and CFI Holding
Can any of the company-specific risk be diversified away by investing in both LSI Software and CFI Holding 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 LSI Software and CFI Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LSI Software SA and CFI Holding SA, you can compare the effects of market volatilities on LSI Software and CFI Holding 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 LSI Software with a short position of CFI Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of LSI Software and CFI Holding.
Diversification Opportunities for LSI Software and CFI Holding
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LSI and CFI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LSI Software SA and CFI Holding SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CFI Holding SA and LSI Software 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 LSI Software SA are associated (or correlated) with CFI Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CFI Holding SA has no effect on the direction of LSI Software i.e., LSI Software and CFI Holding go up and down completely randomly.
Pair Corralation between LSI Software and CFI Holding
Assuming the 90 days trading horizon LSI Software SA is expected to generate 0.52 times more return on investment than CFI Holding. However, LSI Software SA is 1.93 times less risky than CFI Holding. It trades about 0.05 of its potential returns per unit of risk. CFI Holding SA is currently generating about 0.0 per unit of risk. If you would invest 1,096 in LSI Software SA on August 30, 2024 and sell it today you would earn a total of 484.00 from holding LSI Software SA or generate 44.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
LSI Software SA vs. CFI Holding SA
Performance |
| Timeline |
| LSI Software SA |
| CFI Holding SA |
LSI Software and CFI Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LSI Software and CFI Holding
The main advantage of trading using opposite LSI Software and CFI Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LSI Software position performs unexpectedly, CFI Holding 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 CFI Holding will offset losses from the drop in CFI Holding's long position.The idea behind LSI Software SA and CFI Holding 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.| CFI Holding vs. Tower Investments SA | CFI Holding vs. Centrum Finansowe Banku | CFI Holding vs. Alior Bank SA | CFI Holding vs. Santander Bank Polska |
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 Stocks Directory module to find actively traded stocks across global markets.
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