Correlation Between Thales SA and Dassault Aviation

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

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

Diversification Opportunities for Thales SA and Dassault Aviation

0.59

Correlation Coefficient

Thales SA  Dassault Aviation

Very weak diversification

The 3 months correlation between Thales and Dassault is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation and Thales 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 Thales SA are associated (or correlated) with Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Thales SA i.e., Thales SA and Dassault Aviation go up and down completely randomly.

Pair Corralation between Thales SA and Dassault Aviation

Assuming the 90 days horizon Thales SA is expected to under-perform the Dassault Aviation. In addition to that, Thales SA is 1.04 times more volatile than Dassault Aviation SA. It trades about -0.05 of its total potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.01 per unit of volatility. If you would invest  18,950  in Dassault Aviation SA on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Dassault Aviation SA or generate 0.21% return on investment over 90 days.

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

Thales SA  vs.  Dassault Aviation SA

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dassault Aviation

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Thales SA and Dassault Aviation

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

The idea behind Thales SA and Dassault Aviation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.