Correlation Between ABERFORTH SMCOS and Safran SA

Can any of the company-specific risk be diversified away by investing in both ABERFORTH SMCOS and Safran 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 ABERFORTH SMCOS and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABERFORTH SMCOS TRLS 01 and Safran SA, you can compare the effects of market volatilities on ABERFORTH SMCOS and Safran 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 ABERFORTH SMCOS with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABERFORTH SMCOS and Safran SA.

Diversification Opportunities for ABERFORTH SMCOS and Safran SA

-0.62

Correlation Coefficient

ABERFORTH SMCOS  Safran SA

Excellent diversification

The 3 months correlation between ABERFORTH and Safran is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ABERFORTH SMCOS TRLS 01 and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA and ABERFORTH SMCOS 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 ABERFORTH SMCOS TRLS 01 are associated (or correlated) with Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of ABERFORTH SMCOS i.e., ABERFORTH SMCOS and Safran SA go up and down completely randomly.

Pair Corralation between ABERFORTH SMCOS and Safran SA

Assuming the 90 days horizon ABERFORTH SMCOS TRLS 01 is expected to under-perform the Safran SA. But the stock apears to be less risky and, when comparing its historical volatility, ABERFORTH SMCOS TRLS 01 is 1.13 times less risky than Safran SA. The stock trades about -0.04 of its potential returns per unit of risk. The Safran SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  19,260  in Safran SA on September 5, 2024 and sell it today you would earn a total of  2,810  from holding Safran SA or generate 14.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ABERFORTH SMCOS TRLS 01  vs.  Safran SA

ABERFORTH SMCOS TRLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABERFORTH SMCOS TRLS 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABERFORTH SMCOS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Safran SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Safran SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABERFORTH SMCOS and Safran SA

The main advantage of trading using opposite ABERFORTH SMCOS and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABERFORTH SMCOS position performs unexpectedly, Safran 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 Safran SA will offset losses from the drop in Safran SA's long position.

The idea behind ABERFORTH SMCOS TRLS 01 and Safran 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.