Correlation Between Gaztransport and MG Plc

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

By analyzing existing cross correlation between Gaztransport et Technigaz and MG Plc, you can compare the effects of market volatilities on Gaztransport and MG Plc 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 Gaztransport with a short position of MG Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport and MG Plc.

Diversification Opportunities for Gaztransport and MG Plc

0.43

Correlation Coefficient

Gaztransport  MG Plc

Very weak diversification

The 3 months correlation between Gaztransport and MNG is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport et Technigaz and MG Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Plc and Gaztransport 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 Gaztransport et Technigaz are associated (or correlated) with MG Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Plc has no effect on the direction of Gaztransport i.e., Gaztransport and MG Plc go up and down completely randomly.

Pair Corralation between Gaztransport and MG Plc

Assuming the 90 days trading horizon Gaztransport et Technigaz is expected to generate 2.62 times more return on investment than MG Plc. However, Gaztransport is 2.62 times more volatile than MG Plc. It trades about 0.08 of its potential returns per unit of risk. MG Plc is currently generating about 0.09 per unit of risk. If you would invest  13,076  in Gaztransport et Technigaz on December 2, 2024 and sell it today you would earn a total of  1,529  from holding Gaztransport et Technigaz or generate 11.69% return on investment over 90 days.

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

Gaztransport et Technigaz  vs.  MG Plc

Gaztransport et Technigaz

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gaztransport unveiled solid returns over the last few months and may actually be approaching a breakup point.

MG Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MG Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, MG Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gaztransport and MG Plc

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

The idea behind Gaztransport et Technigaz and MG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.