Correlation Between Eramet SA and Compagnie
Can any of the company-specific risk be diversified away by investing in both Eramet SA 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 Eramet SA and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Eramet SA 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 Eramet SA with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Compagnie.
Diversification Opportunities for Eramet SA and Compagnie
Excellent diversification
The 3 months correlation between Eramet and Compagnie is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Eramet 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 Eramet SA 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 Saint has no effect on the direction of Eramet SA i.e., Eramet SA and Compagnie go up and down completely randomly.
Pair Corralation between Eramet SA and Compagnie
Assuming the 90 days trading horizon Eramet SA is expected to under-perform the Compagnie. In addition to that, Eramet SA is 1.48 times more volatile than Compagnie de Saint Gobain. It trades about -0.05 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.17 per unit of volatility. If you would invest 8,304 in Compagnie de Saint Gobain on August 28, 2024 and sell it today you would earn a total of 444.00 from holding Compagnie de Saint Gobain or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eramet SA vs. Compagnie de Saint Gobain
Performance |
| Timeline |
| Eramet SA |
| Compagnie de Saint |
Eramet SA and Compagnie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and Compagnie
The main advantage of trading using opposite Eramet SA and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA 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.The idea behind Eramet SA and Compagnie de Saint Gobain 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.| Compagnie vs. Vinci SA | Compagnie vs. Air Liquide SA | Compagnie vs. Compagnie Generale des | Compagnie vs. Bouygues SA |
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 Stocks Directory module to find actively traded stocks across global markets.
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