Correlation Between Edenred SA and Compagnie

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

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

Diversification Opportunities for Edenred SA and Compagnie

0.15

Correlation Coefficient

Edenred SA  Compagnie

Average diversification

The 3 months correlation between Edenred and Compagnie is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Edenred SA and Compagnie du Cambodge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie du Cambodge and Edenred 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 Edenred SA are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie du Cambodge has no effect on the direction of Edenred SA i.e., Edenred SA and Compagnie go up and down completely randomly.

Pair Corralation between Edenred SA and Compagnie

Assuming the 90 days trading horizon Edenred SA is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Edenred SA is 71.01 times less risky than Compagnie. The stock trades about -0.04 of its potential returns per unit of risk. The Compagnie du Cambodge is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,500  in Compagnie du Cambodge on October 11, 2024 and sell it today you would earn a total of  1,900  from holding Compagnie du Cambodge or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Edenred SA  vs.  Compagnie du Cambodge

Edenred SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Compagnie du Cambodge

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie du Cambodge are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edenred SA and Compagnie

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

The idea behind Edenred SA and Compagnie du Cambodge 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.