Correlation Between Poulaillon and Poujoulat

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

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

Diversification Opportunities for Poulaillon and Poujoulat

-0.13

Correlation Coefficient

Poulaillon  Poujoulat

Good diversification

The 3 months correlation between Poulaillon and Poujoulat is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Poulaillon SA and Poujoulat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poujoulat SA and Poulaillon 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 Poulaillon SA are associated (or correlated) with Poujoulat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poujoulat SA has no effect on the direction of Poulaillon i.e., Poulaillon and Poujoulat go up and down completely randomly.

Pair Corralation between Poulaillon and Poujoulat

Assuming the 90 days trading horizon Poulaillon SA is expected to under-perform the Poujoulat. But the stock apears to be less risky and, when comparing its historical volatility, Poulaillon SA is 1.04 times less risky than Poujoulat. The stock trades about -0.03 of its potential returns per unit of risk. The Poujoulat SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Poujoulat SA on December 2, 2024 and sell it today you would earn a total of  125.00  from holding Poujoulat SA or generate 12.76% return on investment over 90 days.

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

Poulaillon SA  vs.  Poujoulat SA

Poulaillon SA

Risk-Adjusted Performance

Very Weak

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

Poujoulat SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Poujoulat SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Poujoulat reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Poulaillon and Poujoulat

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

The idea behind Poulaillon SA and Poujoulat 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.