Correlation Between Brembo SpA and Compagnie Générale

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

By analyzing existing cross correlation between Brembo SpA and Compagnie Gnrale des, you can compare the effects of market volatilities on Brembo SpA and Compagnie Générale 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 Brembo SpA with a short position of Compagnie Générale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brembo SpA and Compagnie Générale.

Diversification Opportunities for Brembo SpA and Compagnie Générale

0.11

Correlation Coefficient

Brembo SpA  Compagnie Générale

Average diversification

The 3 months correlation between Brembo and Compagnie is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Brembo SpA and Compagnie Gnrale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Gnrale des and Brembo SpA 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 Brembo SpA are associated (or correlated) with Compagnie Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Gnrale des has no effect on the direction of Brembo SpA i.e., Brembo SpA and Compagnie Générale go up and down completely randomly.

Pair Corralation between Brembo SpA and Compagnie Générale

Assuming the 90 days horizon Brembo SpA is expected to generate 0.47 times more return on investment than Compagnie Générale. However, Brembo SpA is 2.12 times less risky than Compagnie Générale. It trades about 0.11 of its potential returns per unit of risk. Compagnie Gnrale des is currently generating about 0.05 per unit of risk. If you would invest  908.00  in Brembo SpA on December 4, 2024 and sell it today you would earn a total of  106.00  from holding Brembo SpA or generate 11.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Brembo SpA  vs.  Compagnie Gnrale des

Brembo SpA

Risk-Adjusted Performance

OK

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

Compagnie Gnrale des

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Gnrale des are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Compagnie Générale may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Brembo SpA and Compagnie Générale

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

The idea behind Brembo SpA and Compagnie Gnrale des 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 Transaction History module to view history of all your transactions and understand their impact on performance.