Correlation Between Legrand SA and Ilika Plc
Can any of the company-specific risk be diversified away by investing in both Legrand SA and Ilika Plc 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 Legrand SA and Ilika Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legrand SA ADR and Ilika plc, you can compare the effects of market volatilities on Legrand SA and Ilika Plc 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 Legrand SA with a short position of Ilika Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legrand SA and Ilika Plc.
Diversification Opportunities for Legrand SA and Ilika Plc
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legrand and Ilika is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR and Ilika plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilika plc and Legrand 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 Legrand SA ADR are associated (or correlated) with Ilika Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilika plc has no effect on the direction of Legrand SA i.e., Legrand SA and Ilika Plc go up and down completely randomly.
Pair Corralation between Legrand SA and Ilika Plc
Assuming the 90 days horizon Legrand SA ADR is expected to generate 0.31 times more return on investment than Ilika Plc. However, Legrand SA ADR is 3.24 times less risky than Ilika Plc. It trades about -0.09 of its potential returns per unit of risk. Ilika plc is currently generating about -0.07 per unit of risk. If you would invest 2,169 in Legrand SA ADR on September 7, 2024 and sell it today you would lose (188.00) from holding Legrand SA ADR or give up 8.67% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Legrand SA ADR vs. Ilika plc
Performance |
Timeline |
Legrand SA ADR |
Ilika plc |
Legrand SA and Ilika Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legrand SA and Ilika Plc
The main advantage of trading using opposite Legrand SA and Ilika Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legrand SA position performs unexpectedly, Ilika Plc 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 Ilika Plc will offset losses from the drop in Ilika Plc's long position.Legrand SA vs. AmmPower Corp | Legrand SA vs. FuelPositive Corp | Legrand SA vs. Graphene Manufacturing Group | Legrand SA vs. VSBLTY Groupe Technologies |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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