Correlation Between Fountaine Pajo and Compagnie

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

By analyzing existing cross correlation between Fountaine Pajo and Compagnie Du Mont Blanc, you can compare the effects of market volatilities on Fountaine Pajo and Compagnie 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 Fountaine Pajo with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fountaine Pajo and Compagnie.

Diversification Opportunities for Fountaine Pajo and Compagnie

-0.47

Correlation Coefficient

Fountaine Pajo  Compagnie

Very good diversification

The 3 months correlation between Fountaine and Compagnie is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fountaine Pajo and Compagnie Du Mont Blanc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Du Mont and Fountaine Pajo 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 Fountaine Pajo are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Du Mont has no effect on the direction of Fountaine Pajo i.e., Fountaine Pajo and Compagnie go up and down completely randomly.

Pair Corralation between Fountaine Pajo and Compagnie

Assuming the 90 days trading horizon Fountaine Pajo is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Fountaine Pajo is 1.07 times less risky than Compagnie. The stock trades about -0.01 of its potential returns per unit of risk. The Compagnie Du Mont Blanc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  14,300  in Compagnie Du Mont Blanc on December 30, 2024 and sell it today you would earn a total of  1,200  from holding Compagnie Du Mont Blanc or generate 8.39% return on investment over 90 days.

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

Fountaine Pajo  vs.  Compagnie Du Mont Blanc

Fountaine Pajo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fountaine Pajo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fountaine Pajo is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Compagnie Du Mont

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Du Mont Blanc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fountaine Pajo and Compagnie

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

The idea behind Fountaine Pajo and Compagnie Du Mont Blanc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.