Correlation Between Derichebourg and High Co

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

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

Diversification Opportunities for Derichebourg and High Co

0.54

Correlation Coefficient

Derichebourg  High Co

Very weak diversification

The 3 months correlation between Derichebourg and High is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and High Co SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Co 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 High Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Co SA has no effect on the direction of Derichebourg i.e., Derichebourg and High Co go up and down completely randomly.

Pair Corralation between Derichebourg and High Co

Assuming the 90 days trading horizon Derichebourg is expected to under-perform the High Co. In addition to that, Derichebourg is 1.85 times more volatile than High Co SA. It trades about -0.05 of its total potential returns per unit of risk. High Co SA is currently generating about -0.03 per unit of volatility. If you would invest  257.00  in High Co SA on September 3, 2024 and sell it today you would lose (7.00) from holding High Co SA or give up 2.72% of portfolio value over 90 days.

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

Derichebourg  vs.  High Co 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.

High Co SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Derichebourg and High Co

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

The idea behind Derichebourg and High Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.