Correlation Between Compagnie and Ipsen SA

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

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

Diversification Opportunities for Compagnie and Ipsen SA

-0.69

Correlation Coefficient

Compagnie  Ipsen SA

Excellent diversification

The 3 months correlation between Compagnie and Ipsen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA and Compagnie 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 Compagnie de Saint Gobain are associated (or correlated) with Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Compagnie i.e., Compagnie and Ipsen SA go up and down completely randomly.

Pair Corralation between Compagnie and Ipsen SA

Assuming the 90 days horizon Compagnie de Saint Gobain is expected to generate 1.05 times more return on investment than Ipsen SA. However, Compagnie is 1.05 times more volatile than Ipsen SA. It trades about 0.11 of its potential returns per unit of risk. Ipsen SA is currently generating about 0.02 per unit of risk. If you would invest  5,679  in Compagnie de Saint Gobain on September 23, 2024 and sell it today you would earn a total of  2,893  from holding Compagnie de Saint Gobain or generate 50.94% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Ipsen SA

Compagnie de Saint

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ipsen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ipsen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ipsen SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compagnie and Ipsen SA

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

The idea behind Compagnie de Saint Gobain and Ipsen SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.