Correlation Between Chargeurs and Voyageurs

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

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

Diversification Opportunities for Chargeurs and Voyageurs

0.57

Correlation Coefficient

Chargeurs  Voyageurs

Very weak diversification

The 3 months correlation between Chargeurs and Voyageurs is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chargeurs SA and Voyageurs du Monde in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voyageurs du Monde and Chargeurs 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 Chargeurs SA are associated (or correlated) with Voyageurs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voyageurs du Monde has no effect on the direction of Chargeurs i.e., Chargeurs and Voyageurs go up and down completely randomly.

Pair Corralation between Chargeurs and Voyageurs

Assuming the 90 days trading horizon Chargeurs SA is expected to under-perform the Voyageurs. But the stock apears to be less risky and, when comparing its historical volatility, Chargeurs SA is 1.27 times less risky than Voyageurs. The stock trades about -0.04 of its potential returns per unit of risk. The Voyageurs du Monde is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  12,680  in Voyageurs du Monde on September 25, 2024 and sell it today you would earn a total of  1,340  from holding Voyageurs du Monde or generate 10.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Chargeurs SA  vs.  Voyageurs du Monde

Chargeurs SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chargeurs 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 forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Voyageurs du Monde

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voyageurs du Monde has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Voyageurs is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chargeurs and Voyageurs

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

The idea behind Chargeurs SA and Voyageurs du Monde 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.