Correlation Between Voyageurs and Compagnie

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

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

Diversification Opportunities for Voyageurs and Compagnie

0.33

Correlation Coefficient

Voyageurs  Compagnie

Weak diversification

The 3 months correlation between Voyageurs and Compagnie is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Voyageurs du Monde 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 Voyageurs 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 Voyageurs du Monde 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 Voyageurs i.e., Voyageurs and Compagnie go up and down completely randomly.

Pair Corralation between Voyageurs and Compagnie

Assuming the 90 days trading horizon Voyageurs is expected to generate 2.44 times less return on investment than Compagnie. But when comparing it to its historical volatility, Voyageurs du Monde is 1.3 times less risky than Compagnie. It trades about 0.14 of its potential returns per unit of risk. Compagnie Du Mont Blanc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  13,800  in Compagnie Du Mont Blanc on December 2, 2024 and sell it today you would earn a total of  1,100  from holding Compagnie Du Mont Blanc or generate 7.97% return on investment over 90 days.

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

Voyageurs du Monde  vs.  Compagnie Du Mont Blanc

Voyageurs du Monde

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Voyageurs du Monde are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Voyageurs reported solid returns over the last few months and may actually be approaching a breakup point.

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 7 (%) 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 Voyageurs and Compagnie

The main advantage of trading using opposite Voyageurs and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voyageurs 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 Voyageurs du Monde 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.