Correlation Between ST Dupont and Avenir Telecom

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

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

Diversification Opportunities for ST Dupont and Avenir Telecom

-0.42

Correlation Coefficient

ST Dupont  Avenir Telecom

Very good diversification

The 3 months correlation between DPT and Avenir is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ST Dupont and Avenir Telecom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenir Telecom SA and ST Dupont 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 ST Dupont are associated (or correlated) with Avenir Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenir Telecom SA has no effect on the direction of ST Dupont i.e., ST Dupont and Avenir Telecom go up and down completely randomly.

Pair Corralation between ST Dupont and Avenir Telecom

Assuming the 90 days trading horizon ST Dupont is expected to generate 0.61 times more return on investment than Avenir Telecom. However, ST Dupont is 1.63 times less risky than Avenir Telecom. It trades about 0.01 of its potential returns per unit of risk. Avenir Telecom SA is currently generating about -0.25 per unit of risk. If you would invest  7.94  in ST Dupont on September 17, 2024 and sell it today you would earn a total of  0.00  from holding ST Dupont or generate 0.0% return on investment over 90 days.

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

ST Dupont  vs.  Avenir Telecom SA

ST Dupont

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ST Dupont are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ST Dupont sustained solid returns over the last few months and may actually be approaching a breakup point.

Avenir Telecom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avenir Telecom SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ST Dupont and Avenir Telecom

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

The idea behind ST Dupont and Avenir Telecom 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.