Correlation Between Esso SAF and Derichebourg

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

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

Diversification Opportunities for Esso SAF and Derichebourg

0.47

Correlation Coefficient

Esso SAF  Derichebourg

Very weak diversification

The 3 months correlation between Esso and Derichebourg is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Esso SAF and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg and Esso SAF 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 Esso SAF are associated (or correlated) with Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of Esso SAF i.e., Esso SAF and Derichebourg go up and down completely randomly.

Pair Corralation between Esso SAF and Derichebourg

Assuming the 90 days horizon Esso SAF is expected to under-perform the Derichebourg. But the stock apears to be less risky and, when comparing its historical volatility, Esso SAF is 2.18 times less risky than Derichebourg. The stock trades about -0.09 of its potential returns per unit of risk. The Derichebourg is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  505.00  in Derichebourg on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Derichebourg or generate 1.39% return on investment over 90 days.

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

Esso SAF  vs.  Derichebourg

Esso SAF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Esso SAF 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.

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Esso SAF and Derichebourg

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

The idea behind Esso SAF and Derichebourg 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.