Correlation Between Thales SA and Leonardo Spa
Can any of the company-specific risk be diversified away by investing in both Thales SA 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 Thales SA and Leonardo Spa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thales SA ADR and Leonardo Spa, you can compare the effects of market volatilities on Thales SA 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 Thales SA with a short position of Leonardo Spa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Leonardo Spa.
Diversification Opportunities for Thales SA and Leonardo Spa
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Thales and Leonardo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA ADR and Leonardo Spa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo Spa and Thales SA 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 Thales SA ADR 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 has no effect on the direction of Thales SA i.e., Thales SA and Leonardo Spa go up and down completely randomly.
Pair Corralation between Thales SA and Leonardo Spa
Assuming the 90 days horizon Thales SA is expected to generate 15.51 times less return on investment than Leonardo Spa. But when comparing it to its historical volatility, Thales SA ADR is 2.2 times less risky than Leonardo Spa. It trades about 0.01 of its potential returns per unit of risk. Leonardo Spa is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,469 in Leonardo Spa on September 3, 2024 and sell it today you would earn a total of 1,313 from holding Leonardo Spa or generate 89.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thales SA ADR vs. Leonardo Spa
Performance |
| Timeline |
| Thales SA ADR |
| Leonardo Spa |
Thales SA and Leonardo Spa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thales SA and Leonardo Spa
The main advantage of trading using opposite Thales SA and Leonardo Spa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales SA 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.| Thales SA vs. Rolls Royce Holdings PLC | Thales SA vs. VirTra Inc | Thales SA vs. BWX Technologies | Thales SA vs. Embraer SA ADR |
| Leonardo Spa vs. The Joint Corp | Leonardo Spa vs. Hudson Technologies | Leonardo Spa vs. CF Industries Holdings | Leonardo Spa vs. Sealed Air |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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