Correlation Between Travis Perkins and VINCI SA

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Can any of the company-specific risk be diversified away by investing in both Travis Perkins and VINCI 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 Travis Perkins and VINCI SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Travis Perkins PLC and VINCI SA, you can compare the effects of market volatilities on Travis Perkins and VINCI 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 Travis Perkins with a short position of VINCI SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travis Perkins and VINCI SA.

Diversification Opportunities for Travis Perkins and VINCI SA

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Travis and VINCI is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Travis Perkins PLC and VINCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VINCI SA and Travis Perkins 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 Travis Perkins PLC are associated (or correlated) with VINCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VINCI SA has no effect on the direction of Travis Perkins i.e., Travis Perkins and VINCI SA go up and down completely randomly.

Pair Corralation between Travis Perkins and VINCI SA

Assuming the 90 days horizon Travis Perkins PLC is expected to under-perform the VINCI SA. In addition to that, Travis Perkins is 1.39 times more volatile than VINCI SA. It trades about -0.22 of its total potential returns per unit of risk. VINCI SA is currently generating about -0.24 per unit of volatility. If you would invest  11,621  in VINCI SA on September 8, 2024 and sell it today you would lose (1,518) from holding VINCI SA or give up 13.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy93.02%
ValuesDaily Returns

Travis Perkins PLC  vs.  VINCI SA

 Performance 
       Timeline  
Travis Perkins PLC 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Travis Perkins PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
VINCI SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days VINCI SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Travis Perkins and VINCI SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Travis Perkins and VINCI SA

The main advantage of trading using opposite Travis Perkins and VINCI SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travis Perkins position performs unexpectedly, VINCI 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 VINCI SA will offset losses from the drop in VINCI SA's long position.
The idea behind Travis Perkins PLC and VINCI 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.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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