Correlation Between Compagnie and Lixil Group

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

By analyzing existing cross correlation between Compagnie de Saint Gobain and Lixil Group Corp, you can compare the effects of market volatilities on Compagnie and Lixil Group 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 Lixil Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Lixil Group.

Diversification Opportunities for Compagnie and Lixil Group

-0.48

Correlation Coefficient

Compagnie  Lixil Group

Very good diversification

The 3 months correlation between Compagnie and Lixil is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group Corp 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 de Saint Gobain are associated (or correlated) with Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Compagnie i.e., Compagnie and Lixil Group go up and down completely randomly.

Pair Corralation between Compagnie and Lixil Group

Assuming the 90 days horizon Compagnie de Saint Gobain is expected to generate 1.78 times more return on investment than Lixil Group. However, Compagnie is 1.78 times more volatile than Lixil Group Corp. It trades about 0.08 of its potential returns per unit of risk. Lixil Group Corp is currently generating about -0.04 per unit of risk. If you would invest  4,608  in Compagnie de Saint Gobain on September 20, 2024 and sell it today you would earn a total of  4,447  from holding Compagnie de Saint Gobain or generate 96.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.19%
Values	Daily Returns

Compagnie de Saint Gobain  vs.  Lixil Group Corp

Compagnie de Saint

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Compagnie is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lixil Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lixil Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 and Lixil Group

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

The idea behind Compagnie de Saint Gobain and Lixil Group Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.