Correlation Between Wendel and Compagnie
Can any of the company-specific risk be diversified away by investing in both Wendel 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 Wendel and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wendel and Compagnie de lOdet, you can compare the effects of market volatilities on Wendel 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 Wendel with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendel and Compagnie.
Diversification Opportunities for Wendel and Compagnie
Very weak diversification
The 3 months correlation between Wendel and Compagnie is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Wendel and Compagnie de lOdet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de lOdet and Wendel 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 Wendel 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 lOdet has no effect on the direction of Wendel i.e., Wendel and Compagnie go up and down completely randomly.
Pair Corralation between Wendel and Compagnie
Assuming the 90 days horizon Wendel is expected to generate 1.24 times less return on investment than Compagnie. But when comparing it to its historical volatility, Wendel is 1.07 times less risky than Compagnie. It trades about 0.02 of its potential returns per unit of risk. Compagnie de lOdet is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 132,498 in Compagnie de lOdet on August 30, 2024 and sell it today you would earn a total of 21,502 from holding Compagnie de lOdet or generate 16.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wendel vs. Compagnie de lOdet
Performance |
| Timeline |
| Wendel |
| Compagnie de lOdet |
Wendel and Compagnie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendel and Compagnie
The main advantage of trading using opposite Wendel and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendel 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 Wendel and Compagnie de lOdet 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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