Correlation Between Compagnie and Eramet SA
Can any of the company-specific risk be diversified away by investing in both Compagnie and Eramet SA 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 Eramet SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie de Saint Gobain and Eramet SA, you can compare the effects of market volatilities on Compagnie and Eramet SA 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 Eramet SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Eramet SA.
Diversification Opportunities for Compagnie and Eramet SA
Excellent diversification
The 3 months correlation between Compagnie and Eramet is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Eramet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet 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 Saint Gobain are associated (or correlated) with Eramet SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eramet SA has no effect on the direction of Compagnie i.e., Compagnie and Eramet SA go up and down completely randomly.
Pair Corralation between Compagnie and Eramet SA
Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.68 times more return on investment than Eramet SA. However, Compagnie de Saint Gobain is 1.48 times less risky than Eramet SA. It trades about 0.17 of its potential returns per unit of risk. Eramet SA is currently generating about -0.05 per unit of risk. If you would invest 8,304 in Compagnie de Saint Gobain on August 28, 2024 and sell it today you would earn a total of 444.00 from holding Compagnie de Saint Gobain or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie de Saint Gobain vs. Eramet SA
Performance |
| Timeline |
| Compagnie de Saint |
| Eramet SA |
Compagnie and Eramet SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Eramet SA
The main advantage of trading using opposite Compagnie and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie position performs unexpectedly, Eramet SA 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 Eramet SA will offset losses from the drop in Eramet SA's long position.| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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