Correlation Between Carmat and Aelis Farma

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

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

Diversification Opportunities for Carmat and Aelis Farma

0.82

Correlation Coefficient

Carmat  Aelis Farma

Very poor diversification

The 3 months correlation between Carmat and Aelis is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Carmat and Aelis Farma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aelis Farma SA and Carmat 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 Carmat are associated (or correlated) with Aelis Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aelis Farma SA has no effect on the direction of Carmat i.e., Carmat and Aelis Farma go up and down completely randomly.

Pair Corralation between Carmat and Aelis Farma

Assuming the 90 days trading horizon Carmat is expected to generate 1.65 times more return on investment than Aelis Farma. However, Carmat is 1.65 times more volatile than Aelis Farma SA. It trades about -0.14 of its potential returns per unit of risk. Aelis Farma SA is currently generating about -0.38 per unit of risk. If you would invest  196.00  in Carmat on September 15, 2024 and sell it today you would lose (87.00) from holding Carmat or give up 44.39% of portfolio value over 90 days.

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

Carmat  vs.  Aelis Farma SA

Carmat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Aelis Farma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aelis Farma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Carmat and Aelis Farma

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

The idea behind Carmat and Aelis Farma 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.