Correlation Between Compagnie and Vallourec
Can any of the company-specific risk be diversified away by investing in both Compagnie and Vallourec 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 Vallourec 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 Vallourec, you can compare the effects of market volatilities on Compagnie and Vallourec 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 Vallourec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Vallourec.
Diversification Opportunities for Compagnie and Vallourec
Poor diversification
The 3 months correlation between Compagnie and Vallourec is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec 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 Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of Compagnie i.e., Compagnie and Vallourec go up and down completely randomly.
Pair Corralation between Compagnie and Vallourec
Assuming the 90 days trading horizon Compagnie is expected to generate 2.52 times less return on investment than Vallourec. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.66 times less risky than Vallourec. It trades about 0.21 of its potential returns per unit of risk. Vallourec is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,394 in Vallourec on August 24, 2024 and sell it today you would earn a total of 271.00 from holding Vallourec or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie de Saint Gobain vs. Vallourec
Performance |
| Timeline |
| Compagnie de Saint |
| Vallourec |
Compagnie and Vallourec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Vallourec
The main advantage of trading using opposite Compagnie and Vallourec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie position performs unexpectedly, Vallourec 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 Vallourec will offset losses from the drop in Vallourec'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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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