Correlation Between Lagardere SCA and Television Francaise

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

By analyzing existing cross correlation between Lagardere SCA and Television Francaise 1, you can compare the effects of market volatilities on Lagardere SCA and Television Francaise 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 Lagardere SCA with a short position of Television Francaise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lagardere SCA and Television Francaise.

Diversification Opportunities for Lagardere SCA and Television Francaise

0.76

Correlation Coefficient

Lagardere SCA  Television Francaise

Poor diversification

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

Pair Corralation between Lagardere SCA and Television Francaise

Assuming the 90 days trading horizon Lagardere SCA is expected to generate 0.93 times more return on investment than Television Francaise. However, Lagardere SCA is 1.08 times less risky than Television Francaise. It trades about -0.07 of its potential returns per unit of risk. Television Francaise 1 is currently generating about -0.11 per unit of risk. If you would invest  2,205  in Lagardere SCA on September 3, 2024 and sell it today you would lose (105.00) from holding Lagardere SCA or give up 4.76% of portfolio value over 90 days.

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

Lagardere SCA  vs.  Television Francaise 1

Lagardere SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Television Francaise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Television Francaise 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lagardere SCA and Television Francaise

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

The idea behind Lagardere SCA and Television Francaise 1 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.