Correlation Between Interparfums and Agrogeneration

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

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

Diversification Opportunities for Interparfums and Agrogeneration

0.36

Correlation Coefficient

Interparfums  Agrogeneration

Weak diversification

The 3 months correlation between Interparfums and Agrogeneration is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Interparfums SA and Agrogeneration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agrogeneration and Interparfums 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 Interparfums SA are associated (or correlated) with Agrogeneration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agrogeneration has no effect on the direction of Interparfums i.e., Interparfums and Agrogeneration go up and down completely randomly.

Pair Corralation between Interparfums and Agrogeneration

Assuming the 90 days trading horizon Interparfums SA is expected to under-perform the Agrogeneration. But the stock apears to be less risky and, when comparing its historical volatility, Interparfums SA is 1.88 times less risky than Agrogeneration. The stock trades about 0.0 of its potential returns per unit of risk. The Agrogeneration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.34  in Agrogeneration on September 23, 2024 and sell it today you would earn a total of  0.60  from holding Agrogeneration or generate 11.24% return on investment over 90 days.

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

Interparfums SA  vs.  Agrogeneration

Interparfums SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Agrogeneration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agrogeneration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agrogeneration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Interparfums and Agrogeneration

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

The idea behind Interparfums SA and Agrogeneration 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.

Check out your portfolio center.

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.