Correlation Between Carmat SA and Parkson Retail

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

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

Diversification Opportunities for Carmat SA and Parkson Retail

0.22

Correlation Coefficient

Carmat SA  Parkson Retail

Modest diversification

The 3 months correlation between Carmat and Parkson is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and Parkson Retail Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkson Retail Group and Carmat 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 Carmat SA are associated (or correlated) with Parkson Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkson Retail Group has no effect on the direction of Carmat SA i.e., Carmat SA and Parkson Retail go up and down completely randomly.

Pair Corralation between Carmat SA and Parkson Retail

Assuming the 90 days horizon Carmat SA is expected to under-perform the Parkson Retail. But the stock apears to be less risky and, when comparing its historical volatility, Carmat SA is 2.11 times less risky than Parkson Retail. The stock trades about -0.04 of its potential returns per unit of risk. The Parkson Retail Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.85  in Parkson Retail Group on December 30, 2024 and sell it today you would lose (0.20) from holding Parkson Retail Group or give up 23.53% of portfolio value over 90 days.

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

Carmat SA  vs.  Parkson Retail Group

Carmat SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Parkson Retail Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parkson Retail Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile forward indicators, Parkson Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Carmat SA and Parkson Retail

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

The idea behind Carmat SA and Parkson Retail Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.