Correlation Between Credit Agricole and Carrefour

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

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

Diversification Opportunities for Credit Agricole and Carrefour

-0.55

Correlation Coefficient

Credit Agricole  Carrefour

Excellent diversification

The 3 months correlation between Credit and Carrefour is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole SA and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA and Credit Agricole 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 Credit Agricole SA are associated (or correlated) with Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of Credit Agricole i.e., Credit Agricole and Carrefour go up and down completely randomly.

Pair Corralation between Credit Agricole and Carrefour

Assuming the 90 days trading horizon Credit Agricole SA is expected to generate 0.45 times more return on investment than Carrefour. However, Credit Agricole SA is 2.2 times less risky than Carrefour. It trades about 0.47 of its potential returns per unit of risk. Carrefour SA is currently generating about -0.1 per unit of risk. If you would invest  1,267  in Credit Agricole SA on November 29, 2024 and sell it today you would earn a total of  327.00  from holding Credit Agricole SA or generate 25.81% return on investment over 90 days.

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

Credit Agricole SA  vs.  Carrefour SA

Credit Agricole SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole SA are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Credit Agricole sustained solid returns over the last few months and may actually be approaching a breakup point.

Carrefour SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Credit Agricole and Carrefour

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

The idea behind Credit Agricole SA and Carrefour 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.