Correlation Between Frey SA and Artois Nom

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

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

Diversification Opportunities for Frey SA and Artois Nom

-0.65

Correlation Coefficient

Frey SA  Artois Nom

Excellent diversification

The 3 months correlation between Frey and Artois is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Frey SA and Artois Nom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artois Nom and Frey 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 Frey SA are associated (or correlated) with Artois Nom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artois Nom has no effect on the direction of Frey SA i.e., Frey SA and Artois Nom go up and down completely randomly.

Pair Corralation between Frey SA and Artois Nom

Assuming the 90 days trading horizon Frey SA is expected to under-perform the Artois Nom. But the stock apears to be less risky and, when comparing its historical volatility, Frey SA is 2.51 times less risky than Artois Nom. The stock trades about -0.09 of its potential returns per unit of risk. The Artois Nom is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,100,000  in Artois Nom on December 30, 2024 and sell it today you would earn a total of  50,000  from holding Artois Nom or generate 4.55% return on investment over 90 days.

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

Frey SA  vs.  Artois Nom

Frey SA

Risk-Adjusted Performance

Very Weak

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

Artois Nom

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Frey SA and Artois Nom

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

The idea behind Frey SA and Artois Nom 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.