Correlation Between Derichebourg and Aurea SA

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

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

Diversification Opportunities for Derichebourg and Aurea SA

0.26

Correlation Coefficient

Derichebourg  Aurea SA

Modest diversification

The 3 months correlation between Derichebourg and Aurea is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Aurea SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurea SA and Derichebourg 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 Derichebourg are associated (or correlated) with Aurea SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurea SA has no effect on the direction of Derichebourg i.e., Derichebourg and Aurea SA go up and down completely randomly.

Pair Corralation between Derichebourg and Aurea SA

Assuming the 90 days trading horizon Derichebourg is expected to generate 4.82 times less return on investment than Aurea SA. But when comparing it to its historical volatility, Derichebourg is 1.22 times less risky than Aurea SA. It trades about 0.02 of its potential returns per unit of risk. Aurea SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Aurea SA on September 12, 2024 and sell it today you would earn a total of  50.00  from holding Aurea SA or generate 9.62% return on investment over 90 days.

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

Derichebourg  vs.  Aurea SA

Derichebourg

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Derichebourg are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Derichebourg is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aurea SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurea SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurea SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Derichebourg and Aurea SA

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

The idea behind Derichebourg and Aurea SA 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.