Correlation Between Compagnie Financiere and Hypothekarbank Lenzburg

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

By analyzing existing cross correlation between Compagnie Financiere Tradition and Hypothekarbank Lenzburg AG, you can compare the effects of market volatilities on Compagnie Financiere and Hypothekarbank Lenzburg 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 Financiere with a short position of Hypothekarbank Lenzburg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financiere and Hypothekarbank Lenzburg.

Diversification Opportunities for Compagnie Financiere and Hypothekarbank Lenzburg

0.57

Correlation Coefficient

Compagnie Financiere  Hypothekarbank Lenzburg

Very weak diversification

The 3 months correlation between Compagnie and Hypothekarbank is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Tradition and Hypothekarbank Lenzburg AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hypothekarbank Lenzburg and Compagnie Financiere 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 Financiere Tradition are associated (or correlated) with Hypothekarbank Lenzburg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hypothekarbank Lenzburg has no effect on the direction of Compagnie Financiere i.e., Compagnie Financiere and Hypothekarbank Lenzburg go up and down completely randomly.

Pair Corralation between Compagnie Financiere and Hypothekarbank Lenzburg

Assuming the 90 days trading horizon Compagnie Financiere Tradition is expected to generate 1.69 times more return on investment than Hypothekarbank Lenzburg. However, Compagnie Financiere is 1.69 times more volatile than Hypothekarbank Lenzburg AG. It trades about 0.12 of its potential returns per unit of risk. Hypothekarbank Lenzburg AG is currently generating about 0.04 per unit of risk. If you would invest  18,100  in Compagnie Financiere Tradition on December 26, 2024 and sell it today you would earn a total of  2,200  from holding Compagnie Financiere Tradition or generate 12.15% return on investment over 90 days.

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

Compagnie Financiere Tradition  vs.  Hypothekarbank Lenzburg AG

Compagnie Financiere

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financiere Tradition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compagnie Financiere showed solid returns over the last few months and may actually be approaching a breakup point.

Hypothekarbank Lenzburg

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hypothekarbank Lenzburg AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hypothekarbank Lenzburg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Compagnie Financiere and Hypothekarbank Lenzburg

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

The idea behind Compagnie Financiere Tradition and Hypothekarbank Lenzburg AG 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.