Correlation Between Compagnie and Touax SCA

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

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

Diversification Opportunities for Compagnie and Touax SCA

-0.76

Correlation Coefficient

Compagnie  Touax SCA

Pay attention - limited upside

The 3 months correlation between Compagnie and Touax is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Du Mont Blanc and Touax SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touax SCA 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 Du Mont Blanc are associated (or correlated) with Touax SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touax SCA has no effect on the direction of Compagnie i.e., Compagnie and Touax SCA go up and down completely randomly.

Pair Corralation between Compagnie and Touax SCA

Assuming the 90 days trading horizon Compagnie Du Mont Blanc is expected to generate 0.93 times more return on investment than Touax SCA. However, Compagnie Du Mont Blanc is 1.08 times less risky than Touax SCA. It trades about 0.15 of its potential returns per unit of risk. Touax SCA is currently generating about -0.2 per unit of risk. If you would invest  13,443  in Compagnie Du Mont Blanc on September 15, 2024 and sell it today you would earn a total of  857.00  from holding Compagnie Du Mont Blanc or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Compagnie Du Mont Blanc  vs.  Touax SCA

Compagnie Du Mont

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Du Mont Blanc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Touax SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touax SCA 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Compagnie and Touax SCA

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

The idea behind Compagnie Du Mont Blanc and Touax 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.