Correlation Between Koninklijke Philips and Compagnie
Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips 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 Koninklijke Philips and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke Philips NV and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Koninklijke Philips 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 Koninklijke Philips with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Compagnie.
Diversification Opportunities for Koninklijke Philips and Compagnie
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Koninklijke and Compagnie is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Koninklijke Philips 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 Koninklijke Philips NV 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 Saint has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and Compagnie go up and down completely randomly.
Pair Corralation between Koninklijke Philips and Compagnie
Assuming the 90 days trading horizon Koninklijke Philips NV is expected to generate 0.84 times more return on investment than Compagnie. However, Koninklijke Philips NV is 1.19 times less risky than Compagnie. It trades about 0.23 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.1 per unit of risk. If you would invest 2,423 in Koninklijke Philips NV on August 31, 2024 and sell it today you would earn a total of 162.00 from holding Koninklijke Philips NV or generate 6.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke Philips NV vs. Compagnie de Saint Gobain
Performance |
| Timeline |
| Koninklijke Philips |
| Compagnie de Saint |
Koninklijke Philips and Compagnie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke Philips and Compagnie
The main advantage of trading using opposite Koninklijke Philips and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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.| Koninklijke Philips vs. Unilever PLC | Koninklijke Philips vs. ING Groep NV | Koninklijke Philips vs. Aegon NV | Koninklijke Philips vs. Koninklijke Ahold Delhaize |
| Compagnie vs. Vinci SA | Compagnie vs. Air Liquide SA | Compagnie vs. Compagnie Generale des | Compagnie vs. Bouygues 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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