Correlation Between Nexity and Elior SCA
Can any of the company-specific risk be diversified away by investing in both Nexity and Elior SCA 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 Nexity and Elior SCA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nexity and Elior SCA, you can compare the effects of market volatilities on Nexity and Elior SCA 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 Nexity with a short position of Elior SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexity and Elior SCA.
Diversification Opportunities for Nexity and Elior SCA
Poor diversification
The 3 months correlation between Nexity and Elior is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nexity and Elior SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elior SCA and Nexity 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 Nexity are associated (or correlated) with Elior SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elior SCA has no effect on the direction of Nexity i.e., Nexity and Elior SCA go up and down completely randomly.
Pair Corralation between Nexity and Elior SCA
Assuming the 90 days trading horizon Nexity is expected to under-perform the Elior SCA. But the stock apears to be less risky and, when comparing its historical volatility, Nexity is 1.28 times less risky than Elior SCA. The stock trades about -0.03 of its potential returns per unit of risk. The Elior SCA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 308.00 in Elior SCA on August 30, 2024 and sell it today you would lose (49.00) from holding Elior SCA or give up 15.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nexity vs. Elior SCA
Performance |
| Timeline |
| Nexity |
| Elior SCA |
Nexity and Elior SCA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nexity and Elior SCA
The main advantage of trading using opposite Nexity and Elior SCA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexity position performs unexpectedly, Elior SCA 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 Elior SCA will offset losses from the drop in Elior SCA's long position.The idea behind Nexity and Elior SCA 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.| Elior SCA vs. Avenir Telecom SA | Elior SCA vs. Eutelsat Communications SA | Elior SCA vs. Fiducial Office Solutions | Elior SCA vs. X Fab Silicon |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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