Correlation Between Derichebourg and Elis SA

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

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

Diversification Opportunities for Derichebourg and Elis SA

0.03

Correlation Coefficient

Derichebourg  Elis SA

Significant diversification

The 3 months correlation between Derichebourg and Elis is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Elis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elis 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 Elis SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elis SA has no effect on the direction of Derichebourg i.e., Derichebourg and Elis SA go up and down completely randomly.

Pair Corralation between Derichebourg and Elis SA

Assuming the 90 days trading horizon Derichebourg is expected to generate 0.75 times more return on investment than Elis SA. However, Derichebourg is 1.33 times less risky than Elis SA. It trades about -0.05 of its potential returns per unit of risk. Elis SA is currently generating about -0.08 per unit of risk. If you would invest  498.00  in Derichebourg on September 3, 2024 and sell it today you would lose (41.00) from holding Derichebourg or give up 8.23% of portfolio value over 90 days.

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

Derichebourg  vs.  Elis SA

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derichebourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Elis SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elis 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 basic 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.

Pair Trading with Derichebourg and Elis SA

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

The idea behind Derichebourg and Elis 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.