Correlation Between Seche Environnement and General Accident

Can any of the company-specific risk be diversified away by investing in both Seche Environnement and General Accident 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 Seche Environnement and General Accident into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seche Environnement SA and General Accident plc, you can compare the effects of market volatilities on Seche Environnement and General Accident 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 Seche Environnement with a short position of General Accident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seche Environnement and General Accident.

Diversification Opportunities for Seche Environnement and General Accident

-0.16

Correlation Coefficient

Seche Environnement  General Accident

Good diversification

The 3 months correlation between Seche and General is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnement SA and General Accident plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Accident plc and Seche Environnement 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 Seche Environnement SA are associated (or correlated) with General Accident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Accident plc has no effect on the direction of Seche Environnement i.e., Seche Environnement and General Accident go up and down completely randomly.

Pair Corralation between Seche Environnement and General Accident

Assuming the 90 days trading horizon Seche Environnement is expected to generate 2.45 times less return on investment than General Accident. In addition to that, Seche Environnement is 2.09 times more volatile than General Accident plc. It trades about 0.04 of its total potential returns per unit of risk. General Accident plc is currently generating about 0.18 per unit of volatility. If you would invest  11,667  in General Accident plc on December 23, 2024 and sell it today you would earn a total of  1,633  from holding General Accident plc or generate 14.0% return on investment over 90 days.

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

Seche Environnement SA  vs.  General Accident plc

Seche Environnement

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seche Environnement SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Seche Environnement is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

General Accident plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Accident plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Accident unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seche Environnement and General Accident

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

The idea behind Seche Environnement SA and General Accident plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.