Correlation Between COFACE SA and Everest Group

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

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

Diversification Opportunities for COFACE SA and Everest Group

-0.56

Correlation Coefficient

COFACE SA  Everest Group

Excellent diversification

The 3 months correlation between COFACE and Everest is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding COFACE SA and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group and COFACE 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 COFACE SA are associated (or correlated) with Everest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of COFACE SA i.e., COFACE SA and Everest Group go up and down completely randomly.

Pair Corralation between COFACE SA and Everest Group

Assuming the 90 days horizon COFACE SA is expected to generate 0.92 times more return on investment than Everest Group. However, COFACE SA is 1.08 times less risky than Everest Group. It trades about 0.26 of its potential returns per unit of risk. Everest Group is currently generating about -0.03 per unit of risk. If you would invest  1,412  in COFACE SA on December 26, 2024 and sell it today you would earn a total of  384.00  from holding COFACE SA or generate 27.2% return on investment over 90 days.

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

COFACE SA  vs.  Everest Group

COFACE SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COFACE SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COFACE SA reported solid returns over the last few months and may actually be approaching a breakup point.

Everest Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with COFACE SA and Everest Group

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

The idea behind COFACE SA and Everest Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.