Correlation Between Placoplatre and Compagnie

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

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

Diversification Opportunities for Placoplatre and Compagnie

-0.3

Correlation Coefficient

Placoplatre  Compagnie

Very good diversification

The 3 months correlation between Placoplatre and Compagnie is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Placoplatre SA and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Placoplatre 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 Placoplatre SA are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Placoplatre i.e., Placoplatre and Compagnie go up and down completely randomly.

Pair Corralation between Placoplatre and Compagnie

Assuming the 90 days trading horizon Placoplatre SA is expected to under-perform the Compagnie. In addition to that, Placoplatre is 1.43 times more volatile than Compagnie de Saint Gobain. It trades about 0.0 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.1 per unit of volatility. If you would invest  5,359  in Compagnie de Saint Gobain on October 5, 2024 and sell it today you would earn a total of  3,031  from holding Compagnie de Saint Gobain or generate 56.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.41%
Values	Daily Returns

Placoplatre SA  vs.  Compagnie de Saint Gobain

Placoplatre SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Placoplatre SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Placoplatre is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Compagnie de Saint

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Placoplatre and Compagnie

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

The idea behind Placoplatre SA and Compagnie de Saint Gobain 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.