Correlation Between Compagnie Financire and SPAR

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

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

Diversification Opportunities for Compagnie Financire and SPAR

0.62

Correlation Coefficient

Compagnie Financire  SPAR

Poor diversification

The 3 months correlation between Compagnie and SPAR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and SPAR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAR Group and Compagnie Financire 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 Financire Richemont are associated (or correlated) with SPAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAR Group has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and SPAR go up and down completely randomly.

Pair Corralation between Compagnie Financire and SPAR

Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to generate 1.98 times more return on investment than SPAR. However, Compagnie Financire is 1.98 times more volatile than SPAR Group. It trades about 0.17 of its potential returns per unit of risk. SPAR Group is currently generating about -0.07 per unit of risk. If you would invest  27,321,100  in Compagnie Financire Richemont on October 9, 2024 and sell it today you would earn a total of  1,366,400  from holding Compagnie Financire Richemont or generate 5.0% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  SPAR Group

Compagnie Financire

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Compagnie Financire is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPAR Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPAR Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SPAR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Financire and SPAR

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

The idea behind Compagnie Financire Richemont and SPAR Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.