Correlation Between Carrefour and J Sainsbury

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

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

Diversification Opportunities for Carrefour and J Sainsbury

0.58

Correlation Coefficient

Carrefour  J Sainsbury

Very weak diversification

The 3 months correlation between Carrefour and JSNSF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Carrefour SA and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc and Carrefour 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 Carrefour SA are associated (or correlated) with J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Carrefour i.e., Carrefour and J Sainsbury go up and down completely randomly.

Pair Corralation between Carrefour and J Sainsbury

Assuming the 90 days horizon Carrefour SA is expected to generate 0.17 times more return on investment than J Sainsbury. However, Carrefour SA is 5.98 times less risky than J Sainsbury. It trades about 0.16 of its potential returns per unit of risk. J Sainsbury plc is currently generating about 0.03 per unit of risk. If you would invest  1,535  in Carrefour SA on August 31, 2024 and sell it today you would earn a total of  38.00  from holding Carrefour SA or generate 2.48% return on investment over 90 days.

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

Carrefour SA  vs.  J Sainsbury plc

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carrefour is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

J Sainsbury plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Sainsbury plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, J Sainsbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carrefour and J Sainsbury

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

The idea behind Carrefour SA and J Sainsbury plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.