Correlation Between Bourse Direct and Infotel SA
Can any of the company-specific risk be diversified away by investing in both Bourse Direct and Infotel 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 Bourse Direct and Infotel SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bourse Direct SA and Infotel SA, you can compare the effects of market volatilities on Bourse Direct and Infotel 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 Bourse Direct with a short position of Infotel SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bourse Direct and Infotel SA.
Diversification Opportunities for Bourse Direct and Infotel SA
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bourse and Infotel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bourse Direct SA and Infotel SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infotel SA and Bourse Direct 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 Bourse Direct SA are associated (or correlated) with Infotel SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infotel SA has no effect on the direction of Bourse Direct i.e., Bourse Direct and Infotel SA go up and down completely randomly.
Pair Corralation between Bourse Direct and Infotel SA
Assuming the 90 days trading horizon Bourse Direct SA is expected to under-perform the Infotel SA. In addition to that, Bourse Direct is 1.21 times more volatile than Infotel SA. It trades about -0.16 of its total potential returns per unit of risk. Infotel SA is currently generating about 0.07 per unit of volatility. If you would invest 3,830 in Infotel SA on August 30, 2024 and sell it today you would earn a total of 220.00 from holding Infotel SA or generate 5.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bourse Direct SA vs. Infotel SA
Performance |
| Timeline |
| Bourse Direct SA |
| Infotel SA |
Bourse Direct and Infotel SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bourse Direct and Infotel SA
The main advantage of trading using opposite Bourse Direct and Infotel SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bourse Direct position performs unexpectedly, Infotel 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 Infotel SA will offset losses from the drop in Infotel SA's long position.The idea behind Bourse Direct SA and Infotel 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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