Correlation Between ABC Arbitrage and Tikehau Capital

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

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

Diversification Opportunities for ABC Arbitrage and Tikehau Capital

-0.35

Correlation Coefficient

ABC Arbitrage  Tikehau Capital

Very good diversification

The 3 months correlation between ABC and Tikehau is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding ABC arbitrage SA and Tikehau Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tikehau Capital and ABC Arbitrage 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 ABC arbitrage SA are associated (or correlated) with Tikehau Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tikehau Capital has no effect on the direction of ABC Arbitrage i.e., ABC Arbitrage and Tikehau Capital go up and down completely randomly.

Pair Corralation between ABC Arbitrage and Tikehau Capital

Assuming the 90 days trading horizon ABC arbitrage SA is expected to generate 0.76 times more return on investment than Tikehau Capital. However, ABC arbitrage SA is 1.31 times less risky than Tikehau Capital. It trades about 0.28 of its potential returns per unit of risk. Tikehau Capital is currently generating about -0.03 per unit of risk. If you would invest  476.00  in ABC arbitrage SA on December 30, 2024 and sell it today you would earn a total of  92.00  from holding ABC arbitrage SA or generate 19.33% return on investment over 90 days.

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

ABC arbitrage SA  vs.  Tikehau Capital

ABC arbitrage SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABC arbitrage SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABC Arbitrage sustained solid returns over the last few months and may actually be approaching a breakup point.

Tikehau Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tikehau Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tikehau Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABC Arbitrage and Tikehau Capital

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

The idea behind ABC arbitrage SA and Tikehau Capital 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.