Correlation Between Carrefour and Lagardere SCA

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

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

Diversification Opportunities for Carrefour and Lagardere SCA

0.84

Correlation Coefficient

Carrefour  Lagardere SCA

Very poor diversification

The 3 months correlation between Carrefour and Lagardere is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Carrefour SA and Lagardere SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lagardere SCA and Carrefour 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 Carrefour SA are associated (or correlated) with Lagardere SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lagardere SCA has no effect on the direction of Carrefour i.e., Carrefour and Lagardere SCA go up and down completely randomly.

Pair Corralation between Carrefour and Lagardere SCA

Assuming the 90 days horizon Carrefour SA is expected to under-perform the Lagardere SCA. In addition to that, Carrefour is 1.02 times more volatile than Lagardere SCA. It trades about -0.17 of its total potential returns per unit of risk. Lagardere SCA is currently generating about -0.08 per unit of volatility. If you would invest  2,150  in Lagardere SCA on October 9, 2024 and sell it today you would lose (125.00) from holding Lagardere SCA or give up 5.81% of portfolio value over 90 days.

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

Carrefour SA  vs.  Lagardere SCA

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lagardere SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lagardere SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Lagardere SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carrefour and Lagardere SCA

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

The idea behind Carrefour SA and Lagardere SCA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.