Correlation Between Vinci SA and Fountaine Pajo

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

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

Diversification Opportunities for Vinci SA and Fountaine Pajo

-0.43

Correlation Coefficient

Vinci SA  Fountaine Pajo

Very good diversification

The 3 months correlation between Vinci and Fountaine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vinci SA and Fountaine Pajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountaine Pajo and Vinci SA 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 Vinci SA are associated (or correlated) with Fountaine Pajo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountaine Pajo has no effect on the direction of Vinci SA i.e., Vinci SA and Fountaine Pajo go up and down completely randomly.

Pair Corralation between Vinci SA and Fountaine Pajo

Assuming the 90 days horizon Vinci SA is expected to generate 0.99 times more return on investment than Fountaine Pajo. However, Vinci SA is 1.01 times less risky than Fountaine Pajo. It trades about 0.27 of its potential returns per unit of risk. Fountaine Pajo is currently generating about -0.01 per unit of risk. If you would invest  9,872  in Vinci SA on December 30, 2024 and sell it today you would earn a total of  1,998  from holding Vinci SA or generate 20.24% return on investment over 90 days.

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

Vinci SA  vs.  Fountaine Pajo

Vinci SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vinci SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vinci SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Fountaine Pajo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fountaine Pajo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fountaine Pajo is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vinci SA and Fountaine Pajo

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

The idea behind Vinci SA and Fountaine Pajo 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.