Correlation Between Euronext and Compagnie
Can any of the company-specific risk be diversified away by investing in both Euronext and Compagnie 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 Euronext and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Euronext NV and Compagnie de Chemins, you can compare the effects of market volatilities on Euronext and Compagnie 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 Euronext with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euronext and Compagnie.
Diversification Opportunities for Euronext and Compagnie
Poor diversification
The 3 months correlation between Euronext and Compagnie is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Compagnie de Chemins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Chemins and Euronext 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 Euronext NV are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Chemins has no effect on the direction of Euronext i.e., Euronext and Compagnie go up and down completely randomly.
Pair Corralation between Euronext and Compagnie
Assuming the 90 days trading horizon Euronext is expected to generate 2.3 times less return on investment than Compagnie. But when comparing it to its historical volatility, Euronext NV is 1.81 times less risky than Compagnie. It trades about 0.1 of its potential returns per unit of risk. Compagnie de Chemins is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 84,000 in Compagnie de Chemins on August 30, 2024 and sell it today you would earn a total of 6,000 from holding Compagnie de Chemins or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Euronext NV vs. Compagnie de Chemins
Performance |
| Timeline |
| Euronext NV |
| Compagnie de Chemins |
Euronext and Compagnie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Euronext and Compagnie
The main advantage of trading using opposite Euronext and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronext position performs unexpectedly, Compagnie 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 will offset losses from the drop in Compagnie's long position.| Euronext vs. Amundi SA | Euronext vs. Teleperformance SE | Euronext vs. Eurofins Scientific SE | Euronext vs. Sartorius Stedim Biotech |
| Compagnie vs. Metalliance SA | Compagnie vs. CMG Cleantech SA | Compagnie vs. Les Hotels Bav | Compagnie vs. Impulse Fitness Solutions |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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