Correlation Between Compagnie and Peijia Medical

Can any of the company-specific risk be diversified away by investing in both Compagnie and Peijia Medical 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 Peijia Medical 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 Peijia Medical Limited, you can compare the effects of market volatilities on Compagnie and Peijia Medical 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 Peijia Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Peijia Medical.

Diversification Opportunities for Compagnie and Peijia Medical

-0.04

Correlation Coefficient

Compagnie  Peijia Medical

Good diversification

The 3 months correlation between Compagnie and Peijia is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Peijia Medical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peijia Medical 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 Peijia Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peijia Medical has no effect on the direction of Compagnie i.e., Compagnie and Peijia Medical go up and down completely randomly.

Pair Corralation between Compagnie and Peijia Medical

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.45 times more return on investment than Peijia Medical. However, Compagnie de Saint Gobain is 2.21 times less risky than Peijia Medical. It trades about 0.09 of its potential returns per unit of risk. Peijia Medical Limited is currently generating about -0.01 per unit of risk. If you would invest  8,202  in Compagnie de Saint Gobain on October 25, 2024 and sell it today you would earn a total of  622.00  from holding Compagnie de Saint Gobain or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Compagnie de Saint Gobain  vs.  Peijia Medical Limited

Compagnie de Saint

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, Compagnie may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Peijia Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peijia Medical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Peijia Medical 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 Peijia Medical

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

The idea behind Compagnie de Saint Gobain and Peijia Medical Limited 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.