Correlation Between Compagnie Generale and Lear

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

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

Diversification Opportunities for Compagnie Generale and Lear

0.52

Correlation Coefficient

Compagnie Generale  Lear

Very weak diversification

The 3 months correlation between Compagnie and Lear is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Generale des and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Compagnie Generale 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 Generale des are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Compagnie Generale i.e., Compagnie Generale and Lear go up and down completely randomly.

Pair Corralation between Compagnie Generale and Lear

Assuming the 90 days horizon Compagnie Generale des is expected to generate 0.83 times more return on investment than Lear. However, Compagnie Generale des is 1.2 times less risky than Lear. It trades about 0.08 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.02 per unit of risk. If you would invest  1,642  in Compagnie Generale des on December 28, 2024 and sell it today you would earn a total of  128.00  from holding Compagnie Generale des or generate 7.8% return on investment over 90 days.

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

Compagnie Generale des  vs.  Lear Corp.

Compagnie Generale des

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Generale des are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Compagnie Generale may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lear

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Compagnie Generale and Lear

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

The idea behind Compagnie Generale des and Lear Corporation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.