Correlation Between Floridienne and Compagnie

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

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

Diversification Opportunities for Floridienne and Compagnie

0.04

Correlation Coefficient

Floridienne  Compagnie

Significant diversification

The 3 months correlation between Floridienne and Compagnie is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Floridienne and Compagnie du Bois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie du Bois and Floridienne 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 Floridienne 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 Bois has no effect on the direction of Floridienne i.e., Floridienne and Compagnie go up and down completely randomly.

Pair Corralation between Floridienne and Compagnie

Assuming the 90 days trading horizon Floridienne is expected to under-perform the Compagnie. In addition to that, Floridienne is 1.57 times more volatile than Compagnie du Bois. It trades about -0.01 of its total potential returns per unit of risk. Compagnie du Bois is currently generating about 0.08 per unit of volatility. If you would invest  22,900  in Compagnie du Bois on December 31, 2024 and sell it today you would earn a total of  1,600  from holding Compagnie du Bois or generate 6.99% return on investment over 90 days.

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

Floridienne  vs.  Compagnie du Bois

Floridienne

Risk-Adjusted Performance

Very Weak

Over the last 90 days Floridienne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Floridienne is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Compagnie du Bois

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie du Bois are ranked lower than 6 (%) 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 May 2025.

Pair Trading with Floridienne and Compagnie

The main advantage of trading using opposite Floridienne and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floridienne 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 Floridienne and Compagnie du Bois 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.