Correlation Between JCDecaux and Dentsu

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

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

Diversification Opportunities for JCDecaux and Dentsu

0.9

Correlation Coefficient

JCDecaux  Dentsu

Almost no diversification

The 3 months correlation between JCDecaux and Dentsu is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding JCDecaux SA and Dentsu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Inc ADR and JCDecaux 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 JCDecaux SA are associated (or correlated) with Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Inc ADR has no effect on the direction of JCDecaux i.e., JCDecaux and Dentsu go up and down completely randomly.

Pair Corralation between JCDecaux and Dentsu

Assuming the 90 days horizon JCDecaux SA is expected to under-perform the Dentsu. In addition to that, JCDecaux is 1.13 times more volatile than Dentsu Inc ADR. It trades about -0.03 of its total potential returns per unit of risk. Dentsu Inc ADR is currently generating about -0.03 per unit of volatility. If you would invest  3,284  in Dentsu Inc ADR on October 11, 2024 and sell it today you would lose (989.00) from holding Dentsu Inc ADR or give up 30.12% of portfolio value over 90 days.

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

JCDecaux SA  vs.  Dentsu Inc ADR

JCDecaux SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JCDecaux SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dentsu Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JCDecaux and Dentsu

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

The idea behind JCDecaux SA and Dentsu Inc ADR 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.