Correlation Between Derichebourg and CMG Cleantech

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

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

Diversification Opportunities for Derichebourg and CMG Cleantech

-0.18

Correlation Coefficient

Derichebourg  CMG Cleantech

Good diversification

The 3 months correlation between Derichebourg and CMG is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and CMG Cleantech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Cleantech 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 CMG Cleantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Cleantech SA has no effect on the direction of Derichebourg i.e., Derichebourg and CMG Cleantech go up and down completely randomly.

Pair Corralation between Derichebourg and CMG Cleantech

Assuming the 90 days trading horizon Derichebourg is expected to generate 37.21 times less return on investment than CMG Cleantech. In addition to that, Derichebourg is 1.65 times more volatile than CMG Cleantech SA. It trades about 0.0 of its total potential returns per unit of risk. CMG Cleantech SA is currently generating about 0.08 per unit of volatility. If you would invest  120.00  in CMG Cleantech SA on September 25, 2024 and sell it today you would earn a total of  9.00  from holding CMG Cleantech SA or generate 7.5% return on investment over 90 days.

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

Derichebourg  vs.  CMG Cleantech 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 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.

CMG Cleantech SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CMG Cleantech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Derichebourg and CMG Cleantech

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

The idea behind Derichebourg and CMG Cleantech 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.