Correlation Between Compagnie and Societe LDC
Can any of the company-specific risk be diversified away by investing in both Compagnie and Societe LDC 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 Compagnie and Societe LDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie de lOdet and Societe LDC SA, you can compare the effects of market volatilities on Compagnie and Societe LDC 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 Compagnie with a short position of Societe LDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Societe LDC.
Diversification Opportunities for Compagnie and Societe LDC
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compagnie and Societe is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de lOdet and Societe LDC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe LDC SA and Compagnie 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 Compagnie de lOdet are associated (or correlated) with Societe LDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societe LDC SA has no effect on the direction of Compagnie i.e., Compagnie and Societe LDC go up and down completely randomly.
Pair Corralation between Compagnie and Societe LDC
Assuming the 90 days trading horizon Compagnie is expected to generate 4.22 times less return on investment than Societe LDC. But when comparing it to its historical volatility, Compagnie de lOdet is 1.18 times less risky than Societe LDC. It trades about 0.01 of its potential returns per unit of risk. Societe LDC SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,653 in Societe LDC SA on September 2, 2024 and sell it today you would earn a total of 947.00 from holding Societe LDC SA or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie de lOdet vs. Societe LDC SA
Performance |
| Timeline |
| Compagnie de lOdet |
| Societe LDC SA |
Compagnie and Societe LDC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Societe LDC
The main advantage of trading using opposite Compagnie and Societe LDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie position performs unexpectedly, Societe LDC 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 Societe LDC will offset losses from the drop in Societe LDC's long position.The idea behind Compagnie de lOdet and Societe LDC SA 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.| Societe LDC vs. Stef SA | Societe LDC vs. Bonduelle SCA | Societe LDC vs. Lisi SA | Societe LDC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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