Correlation Between Societe De and Altarea SCA

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

By analyzing existing cross correlation between Societe de la and Altarea SCA, you can compare the effects of market volatilities on Societe De and Altarea SCA 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 Societe De with a short position of Altarea SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Societe De and Altarea SCA.

Diversification Opportunities for Societe De and Altarea SCA

0.48

Correlation Coefficient

Societe De  Altarea SCA

Very weak diversification

The 3 months correlation between Societe and Altarea is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Societe de la and Altarea SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altarea SCA and Societe De 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 Societe de la are associated (or correlated) with Altarea SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altarea SCA has no effect on the direction of Societe De i.e., Societe De and Altarea SCA go up and down completely randomly.

Pair Corralation between Societe De and Altarea SCA

Assuming the 90 days trading horizon Societe De is expected to generate 1.42 times less return on investment than Altarea SCA. In addition to that, Societe De is 1.25 times more volatile than Altarea SCA. It trades about 0.04 of its total potential returns per unit of risk. Altarea SCA is currently generating about 0.07 per unit of volatility. If you would invest  9,470  in Altarea SCA on December 30, 2024 and sell it today you would earn a total of  630.00  from holding Altarea SCA or generate 6.65% return on investment over 90 days.

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

Societe de la  vs.  Altarea SCA

Societe de la

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Societe de la are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Societe De is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Altarea SCA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altarea SCA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Altarea SCA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Societe De and Altarea SCA

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

The idea behind Societe de la and Altarea SCA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.