Correlation Between Dassault Aviation and Dassault Systemes

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

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

Diversification Opportunities for Dassault Aviation and Dassault Systemes

0.81

Correlation Coefficient

Dassault Aviation  Dassault Systemes

Very poor diversification

The 3 months correlation between Dassault and Dassault is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Aviation SA and Dassault Systemes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systemes and Dassault Aviation 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 Dassault Aviation SA are associated (or correlated) with Dassault Systemes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systemes has no effect on the direction of Dassault Aviation i.e., Dassault Aviation and Dassault Systemes go up and down completely randomly.

Pair Corralation between Dassault Aviation and Dassault Systemes

Assuming the 90 days horizon Dassault Aviation SA is expected to generate 0.85 times more return on investment than Dassault Systemes. However, Dassault Aviation SA is 1.18 times less risky than Dassault Systemes. It trades about 0.3 of its potential returns per unit of risk. Dassault Systemes SE is currently generating about 0.17 per unit of risk. If you would invest  18,930  in Dassault Aviation SA on December 1, 2024 and sell it today you would earn a total of  5,710  from holding Dassault Aviation SA or generate 30.16% return on investment over 90 days.

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

Dassault Aviation SA  vs.  Dassault Systemes SE

Dassault Aviation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dassault Aviation sustained solid returns over the last few months and may actually be approaching a breakup point.

Dassault Systemes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Systemes SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dassault Systemes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dassault Aviation and Dassault Systemes

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

The idea behind Dassault Aviation SA and Dassault Systemes SE 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.