Correlation Between Thales SA and Safran SA
Can any of the company-specific risk be diversified away by investing in both Thales SA and Safran 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 Thales SA and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thales SA and Safran SA, you can compare the effects of market volatilities on Thales SA and Safran 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 Thales SA with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Safran SA.
Diversification Opportunities for Thales SA and Safran SA
Poor diversification
The 3 months correlation between Thales and Safran is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA and Thales 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 Thales SA are associated (or correlated) with Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Thales SA i.e., Thales SA and Safran SA go up and down completely randomly.
Pair Corralation between Thales SA and Safran SA
Assuming the 90 days horizon Thales SA is expected to generate 1.18 times more return on investment than Safran SA. However, Thales SA is 1.18 times more volatile than Safran SA. It trades about 0.54 of its potential returns per unit of risk. Safran SA is currently generating about 0.59 per unit of risk. If you would invest 13,775 in Thales SA on November 5, 2024 and sell it today you would earn a total of 1,835 from holding Thales SA or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thales SA vs. Safran SA
Performance |
| Timeline |
| Thales SA |
| Safran SA |
Thales SA and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thales SA and Safran SA
The main advantage of trading using opposite Thales SA and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales SA position performs unexpectedly, Safran 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 Safran SA will offset losses from the drop in Safran SA's long position.| Thales SA vs. Safran SA | Thales SA vs. Dassault Systemes SE | Thales SA vs. Dassault Aviation SA | Thales SA vs. Vinci SA |
| Safran SA vs. Thales SA | Safran SA vs. Vinci SA | Safran SA vs. Air Liquide SA | Safran SA vs. Dassault Systemes SE |
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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