Correlation Between Methanor and Lagardere SCA

Can any of the company-specific risk be diversified away by investing in both Methanor and Lagardere SCA 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 Methanor and Lagardere SCA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Methanor and Lagardere SCA, you can compare the effects of market volatilities on Methanor and Lagardere SCA 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 Methanor with a short position of Lagardere SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methanor and Lagardere SCA.

Diversification Opportunities for Methanor and Lagardere SCA

0.76

Correlation Coefficient

Methanor  Lagardere SCA

Poor diversification

The 3 months correlation between Methanor and Lagardere is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Methanor and Lagardere SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagardere SCA and Methanor 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 Methanor are associated (or correlated) with Lagardere SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lagardere SCA has no effect on the direction of Methanor i.e., Methanor and Lagardere SCA go up and down completely randomly.

Pair Corralation between Methanor and Lagardere SCA

Assuming the 90 days trading horizon Methanor is expected to under-perform the Lagardere SCA. In addition to that, Methanor is 2.6 times more volatile than Lagardere SCA. It trades about -0.05 of its total potential returns per unit of risk. Lagardere SCA is currently generating about 0.01 per unit of volatility. If you would invest  2,087  in Lagardere SCA on September 12, 2024 and sell it today you would earn a total of  3.00  from holding Lagardere SCA or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Methanor  vs.  Lagardere SCA

Methanor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Methanor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Lagardere SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lagardere SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Lagardere SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Methanor and Lagardere SCA

The main advantage of trading using opposite Methanor and Lagardere SCA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methanor position performs unexpectedly, Lagardere SCA 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 Lagardere SCA will offset losses from the drop in Lagardere SCA's long position.

The idea behind Methanor and Lagardere SCA 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.