Correlation Between Gascogne and Verallia
Can any of the company-specific risk be diversified away by investing in both Gascogne and Verallia 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 Gascogne and Verallia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gascogne SA and Verallia, you can compare the effects of market volatilities on Gascogne and Verallia 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 Gascogne with a short position of Verallia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gascogne and Verallia.
Diversification Opportunities for Gascogne and Verallia
Very weak diversification
The 3 months correlation between Gascogne and Verallia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gascogne SA and Verallia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verallia and Gascogne 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 Gascogne SA are associated (or correlated) with Verallia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verallia has no effect on the direction of Gascogne i.e., Gascogne and Verallia go up and down completely randomly.
Pair Corralation between Gascogne and Verallia
Assuming the 90 days trading horizon Gascogne SA is expected to generate 1.22 times more return on investment than Verallia. However, Gascogne is 1.22 times more volatile than Verallia. It trades about 0.02 of its potential returns per unit of risk. Verallia is currently generating about -0.28 per unit of risk. If you would invest 248.00 in Gascogne SA on September 21, 2024 and sell it today you would earn a total of 1.00 from holding Gascogne SA or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gascogne SA vs. Verallia
Performance |
| Timeline |
| Gascogne SA |
| Verallia |
Gascogne and Verallia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gascogne and Verallia
The main advantage of trading using opposite Gascogne and Verallia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gascogne position performs unexpectedly, Verallia 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 Verallia will offset losses from the drop in Verallia's long position.The idea behind Gascogne SA and Verallia 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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