Correlation Between EFG International and Compagnie Financire
Can any of the company-specific risk be diversified away by investing in both EFG International and Compagnie Financire 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 EFG International and Compagnie Financire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFG International AG and Compagnie Financire Richemont, you can compare the effects of market volatilities on EFG International and Compagnie Financire 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 EFG International with a short position of Compagnie Financire. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFG International and Compagnie Financire.
Diversification Opportunities for EFG International and Compagnie Financire
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EFG and Compagnie is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EFG International AG and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire and EFG International 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 EFG International AG are associated (or correlated) with Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of EFG International i.e., EFG International and Compagnie Financire go up and down completely randomly.
Pair Corralation between EFG International and Compagnie Financire
Assuming the 90 days trading horizon EFG International is expected to generate 2.95 times less return on investment than Compagnie Financire. But when comparing it to its historical volatility, EFG International AG is 3.3 times less risky than Compagnie Financire. It trades about 0.33 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 13,610 in Compagnie Financire Richemont on October 23, 2024 and sell it today you would earn a total of 2,795 from holding Compagnie Financire Richemont or generate 20.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFG International AG vs. Compagnie Financire Richemont
Performance |
| Timeline |
| EFG International |
| Compagnie Financire |
EFG International and Compagnie Financire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFG International and Compagnie Financire
The main advantage of trading using opposite EFG International and Compagnie Financire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFG International position performs unexpectedly, Compagnie Financire 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 Compagnie Financire will offset losses from the drop in Compagnie Financire's long position.| EFG International vs. Vontobel Holding | EFG International vs. Julius Baer Gruppe | EFG International vs. Helvetia Holding AG | EFG International vs. Cembra Money Bank |
| Compagnie Financire vs. Swatch Group AG | Compagnie Financire vs. Givaudan SA | Compagnie Financire vs. Zurich Insurance Group | Compagnie Financire vs. Novartis AG |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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