Correlation Between LesliesInc and Ceconomy

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

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

Diversification Opportunities for LesliesInc and Ceconomy

0.18

Correlation Coefficient

LesliesInc  Ceconomy

Average diversification

The 3 months correlation between LesliesInc and Ceconomy is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding LesliesInc and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR and LesliesInc 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 LesliesInc are associated (or correlated) with Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of LesliesInc i.e., LesliesInc and Ceconomy go up and down completely randomly.

Pair Corralation between LesliesInc and Ceconomy

Given the investment horizon of 90 days LesliesInc is expected to under-perform the Ceconomy. But the stock apears to be less risky and, when comparing its historical volatility, LesliesInc is 1.25 times less risky than Ceconomy. The stock trades about -0.38 of its potential returns per unit of risk. The Ceconomy AG ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Ceconomy AG ADR on February 1, 2024 and sell it today you would earn a total of  4.00  from holding Ceconomy AG ADR or generate 11.43% return on investment over 90 days.

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

LesliesInc  vs.  Ceconomy AG ADR

LesliesInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LesliesInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ceconomy AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ceconomy AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ceconomy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LesliesInc and Ceconomy

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

The idea behind LesliesInc and Ceconomy AG ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.