Correlation Between Lavipharm and General Commercial

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

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

Diversification Opportunities for Lavipharm and General Commercial

0.52

Correlation Coefficient

Lavipharm  General Commercial

Very weak diversification

The 3 months correlation between Lavipharm and General is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lavipharm SA and General Commercial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Commercial and Lavipharm 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 Lavipharm SA are associated (or correlated) with General Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Commercial has no effect on the direction of Lavipharm i.e., Lavipharm and General Commercial go up and down completely randomly.

Pair Corralation between Lavipharm and General Commercial

Assuming the 90 days trading horizon Lavipharm SA is expected to generate 1.18 times more return on investment than General Commercial. However, Lavipharm is 1.18 times more volatile than General Commercial Industrial. It trades about 0.09 of its potential returns per unit of risk. General Commercial Industrial is currently generating about 0.06 per unit of risk. If you would invest  42.00  in Lavipharm SA on January 31, 2024 and sell it today you would earn a total of  43.00  from holding Lavipharm SA or generate 102.38% return on investment over 90 days.

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

Lavipharm SA  vs.  General Commercial Industrial

Lavipharm SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lavipharm SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lavipharm is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

General Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lavipharm and General Commercial

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

The idea behind Lavipharm SA and General Commercial Industrial 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.