Correlation Between Compagnie and Technip Energies

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

By analyzing existing cross correlation between Compagnie de Chemins and Technip Energies BV, you can compare the effects of market volatilities on Compagnie and Technip Energies 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 with a short position of Technip Energies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Technip Energies.

Diversification Opportunities for Compagnie and Technip Energies

0.61

Correlation Coefficient

Compagnie  Technip Energies

Poor diversification

The 3 months correlation between Compagnie and Technip is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Chemins and Technip Energies BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technip Energies and Compagnie 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 de Chemins are associated (or correlated) with Technip Energies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technip Energies has no effect on the direction of Compagnie i.e., Compagnie and Technip Energies go up and down completely randomly.

Pair Corralation between Compagnie and Technip Energies

Assuming the 90 days trading horizon Compagnie is expected to generate 1.47 times less return on investment than Technip Energies. In addition to that, Compagnie is 1.12 times more volatile than Technip Energies BV. It trades about 0.04 of its total potential returns per unit of risk. Technip Energies BV is currently generating about 0.07 per unit of volatility. If you would invest  1,400  in Technip Energies BV on September 23, 2024 and sell it today you would earn a total of  1,138  from holding Technip Energies BV or generate 81.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.08%
Values	Daily Returns

Compagnie de Chemins  vs.  Technip Energies BV

Compagnie de Chemins

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie reported solid returns over the last few months and may actually be approaching a breakup point.

Technip Energies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technip Energies BV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Technip Energies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Technip Energies

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

The idea behind Compagnie de Chemins and Technip Energies BV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.