Correlation Between CMG Cleantech and Gaztransport Technigaz

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

By analyzing existing cross correlation between CMG Cleantech SA and Gaztransport Technigaz SAS, you can compare the effects of market volatilities on CMG Cleantech and Gaztransport Technigaz 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 CMG Cleantech with a short position of Gaztransport Technigaz. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMG Cleantech and Gaztransport Technigaz.

Diversification Opportunities for CMG Cleantech and Gaztransport Technigaz

0.41

Correlation Coefficient

CMG Cleantech  Gaztransport Technigaz

Very weak diversification

The 3 months correlation between CMG and Gaztransport is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding CMG Cleantech SA and Gaztransport Technigaz SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz and CMG Cleantech 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 CMG Cleantech SA are associated (or correlated) with Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of CMG Cleantech i.e., CMG Cleantech and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between CMG Cleantech and Gaztransport Technigaz

Assuming the 90 days trading horizon CMG Cleantech SA is expected to generate 2.2 times more return on investment than Gaztransport Technigaz. However, CMG Cleantech is 2.2 times more volatile than Gaztransport Technigaz SAS. It trades about 0.15 of its potential returns per unit of risk. Gaztransport Technigaz SAS is currently generating about 0.09 per unit of risk. If you would invest  100.00  in CMG Cleantech SA on September 13, 2024 and sell it today you would earn a total of  28.00  from holding CMG Cleantech SA or generate 28.0% return on investment over 90 days.

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

CMG Cleantech SA  vs.  Gaztransport Technigaz SAS

CMG Cleantech SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Cleantech SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CMG Cleantech reported solid returns over the last few months and may actually be approaching a breakup point.

Gaztransport Technigaz

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SAS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gaztransport Technigaz may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CMG Cleantech and Gaztransport Technigaz

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

The idea behind CMG Cleantech SA and Gaztransport Technigaz SAS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.