Correlation Between Chargeurs and Derichebourg

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

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

Diversification Opportunities for Chargeurs and Derichebourg

0.61

Correlation Coefficient

Chargeurs  Derichebourg

Poor diversification

The 3 months correlation between Chargeurs and Derichebourg is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chargeurs SA and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg 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 Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of Chargeurs i.e., Chargeurs and Derichebourg go up and down completely randomly.

Pair Corralation between Chargeurs and Derichebourg

Assuming the 90 days trading horizon Chargeurs is expected to generate 1.07 times less return on investment than Derichebourg. But when comparing it to its historical volatility, Chargeurs SA is 1.32 times less risky than Derichebourg. It trades about 0.18 of its potential returns per unit of risk. Derichebourg is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  446.00  in Derichebourg on November 29, 2024 and sell it today you would earn a total of  99.00  from holding Derichebourg or generate 22.2% return on investment over 90 days.

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

Chargeurs SA  vs.  Derichebourg

Chargeurs SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chargeurs SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Chargeurs sustained solid returns over the last few months and may actually be approaching a breakup point.

Derichebourg

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Derichebourg are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Derichebourg sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chargeurs and Derichebourg

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

The idea behind Chargeurs SA and Derichebourg 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.