Correlation Between Vinci SA and EPC Groupe

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

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

Diversification Opportunities for Vinci SA and EPC Groupe

-0.18

Correlation Coefficient

Vinci SA  EPC Groupe

Good diversification

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

Pair Corralation between Vinci SA and EPC Groupe

Assuming the 90 days horizon Vinci SA is expected to generate 4.54 times less return on investment than EPC Groupe. But when comparing it to its historical volatility, Vinci SA is 2.04 times less risky than EPC Groupe. It trades about 0.03 of its potential returns per unit of risk. EPC Groupe is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,531  in EPC Groupe on September 13, 2024 and sell it today you would earn a total of  9,469  from holding EPC Groupe or generate 99.35% return on investment over 90 days.

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

Vinci SA  vs.  EPC Groupe

Vinci SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

EPC Groupe

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPC Groupe are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EPC Groupe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vinci SA and EPC Groupe

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

The idea behind Vinci SA and EPC Groupe 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.