Correlation Between Christian Dior and Fountaine Pajo

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

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

Diversification Opportunities for Christian Dior and Fountaine Pajo

0.64

Correlation Coefficient

Christian Dior  Fountaine Pajo

Poor diversification

The 3 months correlation between Christian and Fountaine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Christian Dior SE and Fountaine Pajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountaine Pajo and Christian Dior 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 Christian Dior SE are associated (or correlated) with Fountaine Pajo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountaine Pajo has no effect on the direction of Christian Dior i.e., Christian Dior and Fountaine Pajo go up and down completely randomly.

Pair Corralation between Christian Dior and Fountaine Pajo

Assuming the 90 days trading horizon Christian Dior SE is expected to generate 1.23 times more return on investment than Fountaine Pajo. However, Christian Dior is 1.23 times more volatile than Fountaine Pajo. It trades about -0.03 of its potential returns per unit of risk. Fountaine Pajo is currently generating about -0.09 per unit of risk. If you would invest  59,501  in Christian Dior SE on September 4, 2024 and sell it today you would lose (3,101) from holding Christian Dior SE or give up 5.21% of portfolio value over 90 days.

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

Christian Dior SE  vs.  Fountaine Pajo

Christian Dior SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fountaine Pajo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fountaine Pajo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Christian Dior and Fountaine Pajo

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

The idea behind Christian Dior SE and Fountaine Pajo 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.