Correlation Between Compagnie and Eutelsat Communications

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

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

Diversification Opportunities for Compagnie and Eutelsat Communications

0.25

Correlation Coefficient

Compagnie  Eutelsat Communications

Modest diversification

The 3 months correlation between Compagnie and Eutelsat is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie du Cambodge and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Compagnie 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 Compagnie du Cambodge are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Compagnie i.e., Compagnie and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Compagnie and Eutelsat Communications

Assuming the 90 days trading horizon Compagnie du Cambodge is expected to generate 153.84 times more return on investment than Eutelsat Communications. However, Compagnie is 153.84 times more volatile than Eutelsat Communications SA. It trades about 0.39 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.09 per unit of risk. If you would invest  660,000  in Compagnie du Cambodge on October 12, 2024 and sell it today you would lose (648,400) from holding Compagnie du Cambodge or give up 98.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.83%
Values	Daily Returns

Compagnie du Cambodge  vs.  Eutelsat Communications SA

Compagnie du Cambodge

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie du Cambodge are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Eutelsat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eutelsat Communications 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 essential 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.

Pair Trading with Compagnie and Eutelsat Communications

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

The idea behind Compagnie du Cambodge and Eutelsat Communications SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.