Correlation Between Dassault Aviation and NRJ
Can any of the company-specific risk be diversified away by investing in both Dassault Aviation and NRJ 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 Dassault Aviation and NRJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dassault Aviation SA and NRJ Group, you can compare the effects of market volatilities on Dassault Aviation and NRJ 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 Dassault Aviation with a short position of NRJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dassault Aviation and NRJ.
Diversification Opportunities for Dassault Aviation and NRJ
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dassault and NRJ is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Aviation SA and NRJ Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRJ Group and Dassault Aviation 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 Dassault Aviation SA are associated (or correlated) with NRJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRJ Group has no effect on the direction of Dassault Aviation i.e., Dassault Aviation and NRJ go up and down completely randomly.
Pair Corralation between Dassault Aviation and NRJ
Assuming the 90 days horizon Dassault Aviation SA is expected to generate 1.33 times more return on investment than NRJ. However, Dassault Aviation is 1.33 times more volatile than NRJ Group. It trades about 0.05 of its potential returns per unit of risk. NRJ Group is currently generating about 0.03 per unit of risk. If you would invest 15,438 in Dassault Aviation SA on November 5, 2024 and sell it today you would earn a total of 6,342 from holding Dassault Aviation SA or generate 41.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dassault Aviation SA vs. NRJ Group
Performance |
| Timeline |
| Dassault Aviation |
| NRJ Group |
Dassault Aviation and NRJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dassault Aviation and NRJ
The main advantage of trading using opposite Dassault Aviation and NRJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Aviation position performs unexpectedly, NRJ 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 NRJ will offset losses from the drop in NRJ's long position.| Dassault Aviation vs. Thales SA | Dassault Aviation vs. Dassault Systemes SE | Dassault Aviation vs. Safran SA | Dassault Aviation vs. Eiffage SA |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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