Correlation Between CAC Next and Union Technologies

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

By analyzing existing cross correlation between CAC Next 20 and Union Technologies Informatique, you can compare the effects of market volatilities on CAC Next and Union Technologies 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 CAC Next with a short position of Union Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAC Next and Union Technologies.

Diversification Opportunities for CAC Next and Union Technologies

-0.33

Correlation Coefficient

CAC Next  Union Technologies

Very good diversification

The 3 months correlation between CAC and Union is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding CAC Next 20 and Union Technologies Informatiqu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Technologies and CAC Next 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 CAC Next 20 are associated (or correlated) with Union Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Technologies has no effect on the direction of CAC Next i.e., CAC Next and Union Technologies go up and down completely randomly.

Pair Corralation between CAC Next and Union Technologies

Assuming the 90 days trading horizon CAC Next 20 is expected to generate 0.15 times more return on investment than Union Technologies. However, CAC Next 20 is 6.79 times less risky than Union Technologies. It trades about 0.03 of its potential returns per unit of risk. Union Technologies Informatique is currently generating about -0.09 per unit of risk. If you would invest  1,050,637  in CAC Next 20 on September 25, 2024 and sell it today you would earn a total of  27,287  from holding CAC Next 20 or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

CAC Next 20  vs.  Union Technologies Informatiqu

Pair Trading with CAC Next and Union Technologies

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

The idea behind CAC Next 20 and Union Technologies Informatique 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.