Correlation Between Carbios and Neoen SA

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

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

Diversification Opportunities for Carbios and Neoen SA

-0.95

Correlation Coefficient

Carbios  Neoen SA

Pay attention - limited upside

The 3 months correlation between Carbios and Neoen is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Carbios and Neoen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neoen SA and Carbios 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 Carbios are associated (or correlated) with Neoen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neoen SA has no effect on the direction of Carbios i.e., Carbios and Neoen SA go up and down completely randomly.

Pair Corralation between Carbios and Neoen SA

Assuming the 90 days trading horizon Carbios is expected to under-perform the Neoen SA. In addition to that, Carbios is 24.56 times more volatile than Neoen SA. It trades about -0.36 of its total potential returns per unit of risk. Neoen SA is currently generating about 0.17 per unit of volatility. If you would invest  3,868  in Neoen SA on August 31, 2024 and sell it today you would earn a total of  82.00  from holding Neoen SA or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Carbios  vs.  Neoen SA

Carbios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbios 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 December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Neoen SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neoen SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Neoen SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Carbios and Neoen SA

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

The idea behind Carbios and Neoen 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.