Correlation Between SPIE SA and Mersen SA
Can any of the company-specific risk be diversified away by investing in both SPIE SA and Mersen 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 SPIE SA and Mersen SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPIE SA and Mersen SA, you can compare the effects of market volatilities on SPIE SA and Mersen 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 SPIE SA with a short position of Mersen SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPIE SA and Mersen SA.
Diversification Opportunities for SPIE SA and Mersen SA
Very poor diversification
The 3 months correlation between SPIE and Mersen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPIE SA and Mersen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersen SA and SPIE SA 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 SPIE SA are associated (or correlated) with Mersen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersen SA has no effect on the direction of SPIE SA i.e., SPIE SA and Mersen SA go up and down completely randomly.
Pair Corralation between SPIE SA and Mersen SA
Assuming the 90 days trading horizon SPIE SA is expected to generate 0.55 times more return on investment than Mersen SA. However, SPIE SA is 1.82 times less risky than Mersen SA. It trades about -0.16 of its potential returns per unit of risk. Mersen SA is currently generating about -0.14 per unit of risk. If you would invest 3,602 in SPIE SA on September 12, 2024 and sell it today you would lose (568.00) from holding SPIE SA or give up 15.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPIE SA vs. Mersen SA
Performance |
| Timeline |
| SPIE SA |
| Mersen SA |
SPIE SA and Mersen SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPIE SA and Mersen SA
The main advantage of trading using opposite SPIE SA and Mersen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPIE SA position performs unexpectedly, Mersen 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 Mersen SA will offset losses from the drop in Mersen SA's long position.The idea behind SPIE SA and Mersen 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.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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