Correlation Between Derichebourg and Fnac Darty

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

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

Diversification Opportunities for Derichebourg and Fnac Darty

0.38

Correlation Coefficient

Derichebourg  Fnac Darty

Weak diversification

The 3 months correlation between Derichebourg and Fnac is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Fnac Darty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fnac Darty 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 Fnac Darty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fnac Darty SA has no effect on the direction of Derichebourg i.e., Derichebourg and Fnac Darty go up and down completely randomly.

Pair Corralation between Derichebourg and Fnac Darty

Assuming the 90 days trading horizon Derichebourg is expected to under-perform the Fnac Darty. But the stock apears to be less risky and, when comparing its historical volatility, Derichebourg is 1.22 times less risky than Fnac Darty. The stock trades about -0.05 of its potential returns per unit of risk. The Fnac Darty SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,875  in Fnac Darty SA on September 3, 2024 and sell it today you would lose (220.00) from holding Fnac Darty SA or give up 7.65% of portfolio value over 90 days.

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

Derichebourg  vs.  Fnac Darty 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.

Fnac Darty SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fnac Darty SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fnac Darty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Derichebourg and Fnac Darty

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

The idea behind Derichebourg and Fnac Darty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.