Correlation Between Wendel and IDI SCA

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

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

Diversification Opportunities for Wendel and IDI SCA

0.18

Correlation Coefficient

Wendel  IDI SCA

Average diversification

The 3 months correlation between Wendel and IDI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Wendel and IDI SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDI SCA and Wendel 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 Wendel are associated (or correlated) with IDI SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDI SCA has no effect on the direction of Wendel i.e., Wendel and IDI SCA go up and down completely randomly.

Pair Corralation between Wendel and IDI SCA

Assuming the 90 days horizon Wendel is expected to generate 2.24 times less return on investment than IDI SCA. In addition to that, Wendel is 1.35 times more volatile than IDI SCA. It trades about 0.07 of its total potential returns per unit of risk. IDI SCA is currently generating about 0.22 per unit of volatility. If you would invest  6,549  in IDI SCA on November 20, 2024 and sell it today you would earn a total of  831.00  from holding IDI SCA or generate 12.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Wendel  vs.  IDI SCA

Wendel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wendel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wendel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IDI SCA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDI SCA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IDI SCA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Wendel and IDI SCA

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

The idea behind Wendel and IDI SCA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.