Correlation Between Coface SA and Eutelsat Communications

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

By analyzing existing cross correlation between Coface SA and Eutelsat Communications SA, you can compare the effects of market volatilities on Coface SA and Eutelsat Communications 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 Coface SA with a short position of Eutelsat Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coface SA and Eutelsat Communications.

Diversification Opportunities for Coface SA and Eutelsat Communications

-0.86

Correlation Coefficient

Coface SA  Eutelsat Communications

Pay attention - limited upside

The 3 months correlation between Coface and Eutelsat is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Coface SA and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Coface SA 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 Coface SA are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Coface SA i.e., Coface SA and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Coface SA and Eutelsat Communications

Assuming the 90 days trading horizon Coface SA is expected to generate 0.23 times more return on investment than Eutelsat Communications. However, Coface SA is 4.26 times less risky than Eutelsat Communications. It trades about 0.2 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.33 per unit of risk. If you would invest  1,458  in Coface SA on December 1, 2024 and sell it today you would earn a total of  184.00  from holding Coface SA or generate 12.62% return on investment over 90 days.

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

Coface SA  vs.  Eutelsat Communications SA

Coface SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coface SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coface SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eutelsat Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eutelsat Communications SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Coface SA and Eutelsat Communications

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

The idea behind Coface SA and Eutelsat Communications 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.