Correlation Between Fountaine Pajo and Trigano SA

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

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

Diversification Opportunities for Fountaine Pajo and Trigano SA

-0.28

Correlation Coefficient

Fountaine Pajo  Trigano SA

Very good diversification

The 3 months correlation between Fountaine and Trigano is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fountaine Pajo and Trigano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trigano SA 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 Trigano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trigano SA has no effect on the direction of Fountaine Pajo i.e., Fountaine Pajo and Trigano SA go up and down completely randomly.

Pair Corralation between Fountaine Pajo and Trigano SA

Assuming the 90 days trading horizon Fountaine Pajo is expected to under-perform the Trigano SA. But the stock apears to be less risky and, when comparing its historical volatility, Fountaine Pajo is 1.67 times less risky than Trigano SA. The stock trades about -0.02 of its potential returns per unit of risk. The Trigano SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  9,845  in Trigano SA on September 13, 2024 and sell it today you would earn a total of  2,635  from holding Trigano SA or generate 26.76% return on investment over 90 days.

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

Fountaine Pajo  vs.  Trigano SA

Fountaine Pajo

Risk-Adjusted Performance

0 of 100

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.

Trigano SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trigano SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Trigano SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fountaine Pajo and Trigano SA

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

The idea behind Fountaine Pajo and Trigano 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.