Correlation Between Argan SA and Icade SA
Can any of the company-specific risk be diversified away by investing in both Argan SA and Icade SA 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 Argan SA and Icade SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argan SA and Icade SA, you can compare the effects of market volatilities on Argan SA and Icade SA 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 Argan SA with a short position of Icade SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan SA and Icade SA.
Diversification Opportunities for Argan SA and Icade SA
Poor diversification
The 3 months correlation between Argan and Icade is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Argan SA and Icade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icade SA and Argan 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 Argan SA are associated (or correlated) with Icade SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icade SA has no effect on the direction of Argan SA i.e., Argan SA and Icade SA go up and down completely randomly.
Pair Corralation between Argan SA and Icade SA
Assuming the 90 days trading horizon Argan SA is expected to generate 0.73 times more return on investment than Icade SA. However, Argan SA is 1.37 times less risky than Icade SA. It trades about 0.18 of its potential returns per unit of risk. Icade SA is currently generating about 0.01 per unit of risk. If you would invest 6,040 in Argan SA on November 4, 2024 and sell it today you would earn a total of 320.00 from holding Argan SA or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Argan SA vs. Icade SA
Performance |
| Timeline |
| Argan SA |
| Icade SA |
Argan SA and Icade SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Argan SA and Icade SA
The main advantage of trading using opposite Argan SA and Icade SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan SA position performs unexpectedly, Icade SA 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 Icade SA will offset losses from the drop in Icade SA's long position.The idea behind Argan SA and Icade SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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