Correlation Between Mersen SA and Europlasma

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

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

Diversification Opportunities for Mersen SA and Europlasma

0.91

Correlation Coefficient

Mersen SA  Europlasma

Almost no diversification

The 3 months correlation between Mersen and Europlasma is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mersen SA and Europlasma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europlasma SA and Mersen SA 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 Mersen SA are associated (or correlated) with Europlasma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europlasma SA has no effect on the direction of Mersen SA i.e., Mersen SA and Europlasma go up and down completely randomly.

Pair Corralation between Mersen SA and Europlasma

Assuming the 90 days trading horizon Mersen SA is expected to under-perform the Europlasma. But the stock apears to be less risky and, when comparing its historical volatility, Mersen SA is 7.44 times less risky than Europlasma. The stock trades about -0.21 of its potential returns per unit of risk. The Europlasma SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Europlasma SA on September 4, 2024 and sell it today you would lose (9.35) from holding Europlasma SA or give up 55.0% of portfolio value over 90 days.

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

Mersen SA  vs.  Europlasma SA

Mersen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mersen SA 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.

Europlasma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europlasma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Europlasma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mersen SA and Europlasma

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

The idea behind Mersen SA and Europlasma SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.