Correlation Between Coface SA and Nexity

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

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

Diversification Opportunities for Coface SA and Nexity

0.37

Correlation Coefficient

Coface SA  Nexity

Weak diversification

The 3 months correlation between Coface and Nexity is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Coface SA and Nexity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexity 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 Nexity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexity has no effect on the direction of Coface SA i.e., Coface SA and Nexity go up and down completely randomly.

Pair Corralation between Coface SA and Nexity

Assuming the 90 days trading horizon Coface SA is expected to under-perform the Nexity. But the stock apears to be less risky and, when comparing its historical volatility, Coface SA is 2.59 times less risky than Nexity. The stock trades about 0.0 of its potential returns per unit of risk. The Nexity is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  961.00  in Nexity on August 31, 2024 and sell it today you would earn a total of  205.00  from holding Nexity or generate 21.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Coface SA  vs.  Nexity

Coface SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coface SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Coface SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nexity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Nexity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coface SA and Nexity

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

The idea behind Coface SA and Nexity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.