Correlation Between Compagnie Financière and Kering SA

Can any of the company-specific risk be diversified away by investing in both Compagnie Financière and Kering SA 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 Financière and Kering SA 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 Kering SA, you can compare the effects of market volatilities on Compagnie Financière and Kering SA 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 Financière with a short position of Kering SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financière and Kering SA.

Diversification Opportunities for Compagnie Financière and Kering SA

0.64

Correlation Coefficient

Compagnie Financière  Kering SA

Poor diversification

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

Pair Corralation between Compagnie Financière and Kering SA

Assuming the 90 days horizon Compagnie Financire Richemont is expected to generate 1.09 times more return on investment than Kering SA. However, Compagnie Financière is 1.09 times more volatile than Kering SA. It trades about 0.1 of its potential returns per unit of risk. Kering SA is currently generating about -0.07 per unit of risk. If you would invest  15,556  in Compagnie Financire Richemont on December 30, 2024 and sell it today you would earn a total of  2,554  from holding Compagnie Financire Richemont or generate 16.42% 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.  Kering SA

Compagnie Financière

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Compagnie Financière reported solid returns over the last few months and may actually be approaching a breakup point.

Kering SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compagnie Financière and Kering SA

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

The idea behind Compagnie Financire Richemont and Kering 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.