Correlation Between Compagnie and Melexis NV

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

By analyzing existing cross correlation between Compagnie d Entreprises and Melexis NV, you can compare the effects of market volatilities on Compagnie and Melexis NV 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 Melexis NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Melexis NV.

Diversification Opportunities for Compagnie and Melexis NV

0.65

Correlation Coefficient

Compagnie  Melexis NV

Poor diversification

The 3 months correlation between Compagnie and Melexis is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie d Entreprises and Melexis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melexis NV 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 d Entreprises are associated (or correlated) with Melexis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melexis NV has no effect on the direction of Compagnie i.e., Compagnie and Melexis NV go up and down completely randomly.

Pair Corralation between Compagnie and Melexis NV

Assuming the 90 days trading horizon Compagnie d Entreprises is expected to generate 0.64 times more return on investment than Melexis NV. However, Compagnie d Entreprises is 1.57 times less risky than Melexis NV. It trades about -0.01 of its potential returns per unit of risk. Melexis NV is currently generating about -0.09 per unit of risk. If you would invest  651.00  in Compagnie d Entreprises on October 20, 2024 and sell it today you would lose (11.00) from holding Compagnie d Entreprises or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Compagnie d Entreprises  vs.  Melexis NV

Compagnie d Entreprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie d Entreprises has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Compagnie is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Melexis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melexis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Compagnie and Melexis NV

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

The idea behind Compagnie d Entreprises and Melexis NV 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.

Check out your portfolio center.

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.