Correlation Between Air France and Boiron SA

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

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

Diversification Opportunities for Air France and Boiron SA

0.65

Correlation Coefficient

Air France  Boiron SA

Poor diversification

The 3 months correlation between Air and Boiron is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Boiron SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boiron SA and Air France 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 Air France KLM SA are associated (or correlated) with Boiron SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boiron SA has no effect on the direction of Air France i.e., Air France and Boiron SA go up and down completely randomly.

Pair Corralation between Air France and Boiron SA

Assuming the 90 days horizon Air France KLM SA is expected to generate 1.64 times more return on investment than Boiron SA. However, Air France is 1.64 times more volatile than Boiron SA. It trades about -0.05 of its potential returns per unit of risk. Boiron SA is currently generating about -0.17 per unit of risk. If you would invest  821.00  in Air France KLM SA on September 3, 2024 and sell it today you would lose (82.00) from holding Air France KLM SA or give up 9.99% of portfolio value over 90 days.

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

Air France KLM SA  vs.  Boiron SA

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM 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.

Boiron SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boiron SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air France and Boiron SA

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

The idea behind Air France KLM SA and Boiron 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.