Correlation Between Eutelsat Communications and Compagnie

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

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

Diversification Opportunities for Eutelsat Communications and Compagnie

-0.54

Correlation Coefficient

Eutelsat Communications  Compagnie

Excellent diversification

The 3 months correlation between Eutelsat and Compagnie is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eutelsat Communications SA and Compagnie de Chemins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Chemins and Eutelsat Communications 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 Eutelsat Communications 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 de Chemins has no effect on the direction of Eutelsat Communications i.e., Eutelsat Communications and Compagnie go up and down completely randomly.

Pair Corralation between Eutelsat Communications and Compagnie

Assuming the 90 days trading horizon Eutelsat Communications SA is expected to under-perform the Compagnie. In addition to that, Eutelsat Communications is 1.34 times more volatile than Compagnie de Chemins. It trades about -0.08 of its total potential returns per unit of risk. Compagnie de Chemins is currently generating about 0.03 per unit of volatility. If you would invest  69,500  in Compagnie de Chemins on October 5, 2024 and sell it today you would earn a total of  11,500  from holding Compagnie de Chemins or generate 16.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.36%
Values	Daily Returns

Eutelsat Communications SA  vs.  Compagnie de Chemins

Eutelsat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eutelsat Communications 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 essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compagnie de Chemins

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eutelsat Communications and Compagnie

The main advantage of trading using opposite Eutelsat Communications and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eutelsat Communications 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 Eutelsat Communications SA and Compagnie de Chemins 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.