Correlation Between Bridgestone and Compagnie Gnrale

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

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

Diversification Opportunities for Bridgestone and Compagnie Gnrale

0.34

Correlation Coefficient

Bridgestone  Compagnie Gnrale

Weak diversification

The 3 months correlation between Bridgestone and Compagnie is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone 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 Bridgestone 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 Bridgestone are associated (or correlated) with Compagnie Gnrale. 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 Bridgestone i.e., Bridgestone and Compagnie Gnrale go up and down completely randomly.

Pair Corralation between Bridgestone and Compagnie Gnrale

Assuming the 90 days horizon Bridgestone is expected to generate 1.65 times less return on investment than Compagnie Gnrale. In addition to that, Bridgestone is 1.04 times more volatile than Compagnie Gnrale des. It trades about 0.01 of its total potential returns per unit of risk. Compagnie Gnrale des is currently generating about 0.02 per unit of volatility. If you would invest  3,162  in Compagnie Gnrale des on October 22, 2024 and sell it today you would earn a total of  217.00  from holding Compagnie Gnrale des or generate 6.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.81%
Values	Daily Returns

Bridgestone  vs.  Compagnie Gnrale des

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Bridgestone is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Compagnie Gnrale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Gnrale des has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Compagnie Gnrale is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bridgestone and Compagnie Gnrale

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

The idea behind Bridgestone 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.