Correlation Between National Presto and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both National Presto and Leonardo SpA 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 National Presto and Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Presto Industries and Leonardo SpA ADR, you can compare the effects of market volatilities on National Presto and Leonardo SpA 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 National Presto with a short position of Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Presto and Leonardo SpA.
Diversification Opportunities for National Presto and Leonardo SpA
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Leonardo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding National Presto Industries and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR and National Presto 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 National Presto Industries are associated (or correlated) with Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of National Presto i.e., National Presto and Leonardo SpA go up and down completely randomly.
Pair Corralation between National Presto and Leonardo SpA
Considering the 90-day investment horizon National Presto is expected to generate 1.68 times less return on investment than Leonardo SpA. But when comparing it to its historical volatility, National Presto Industries is 1.02 times less risky than Leonardo SpA. It trades about 0.13 of its potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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 |
National Presto Industries vs. Leonardo SpA ADR
Performance |
| Timeline |
| National Presto Indu |
| Leonardo SpA ADR |
National Presto and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Presto and Leonardo SpA
The main advantage of trading using opposite National Presto and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Presto position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| National Presto vs. Park Electrochemical | National Presto vs. Ducommun Incorporated | National Presto vs. Innovative Solutions and | National Presto vs. VSE Corporation |
| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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