Correlation Between Mersen SA and Smcp SAS
Can any of the company-specific risk be diversified away by investing in both Mersen SA and Smcp SAS 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 Mersen SA and Smcp SAS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mersen SA and Smcp SAS, you can compare the effects of market volatilities on Mersen SA and Smcp SAS 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 Mersen SA with a short position of Smcp SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mersen SA and Smcp SAS.
Diversification Opportunities for Mersen SA and Smcp SAS
Good diversification
The 3 months correlation between Mersen and Smcp is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Mersen SA and Smcp SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smcp SAS and Mersen 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 Mersen SA are associated (or correlated) with Smcp SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smcp SAS has no effect on the direction of Mersen SA i.e., Mersen SA and Smcp SAS go up and down completely randomly.
Pair Corralation between Mersen SA and Smcp SAS
Assuming the 90 days trading horizon Mersen SA is expected to generate 1.19 times more return on investment than Smcp SAS. However, Mersen SA is 1.19 times more volatile than Smcp SAS. It trades about 0.08 of its potential returns per unit of risk. Smcp SAS is currently generating about -0.16 per unit of risk. If you would invest 2,065 in Mersen SA on November 4, 2024 and sell it today you would earn a total of 120.00 from holding Mersen SA or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mersen SA vs. Smcp SAS
Performance |
| Timeline |
| Mersen SA |
| Smcp SAS |
Mersen SA and Smcp SAS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mersen SA and Smcp SAS
The main advantage of trading using opposite Mersen SA and Smcp SAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mersen SA position performs unexpectedly, Smcp SAS 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 Smcp SAS will offset losses from the drop in Smcp SAS's long position.The idea behind Mersen SA and Smcp SAS 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.| Smcp SAS vs. Maisons du Monde | Smcp SAS vs. Fnac Darty SA | Smcp SAS vs. Mersen SA | Smcp SAS vs. Interparfums 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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