Correlation Between Neoen SA and Gaztransport Technigaz

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

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

Diversification Opportunities for Neoen SA and Gaztransport Technigaz

0.7

Correlation Coefficient

Neoen SA  Gaztransport Technigaz

Poor diversification

The 3 months correlation between Neoen and Gaztransport is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Neoen 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 Neoen 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 Neoen 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 Neoen SA i.e., Neoen SA and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between Neoen SA and Gaztransport Technigaz

Assuming the 90 days trading horizon Neoen SA is expected to generate 7.91 times less return on investment than Gaztransport Technigaz. But when comparing it to its historical volatility, Neoen SA is 7.25 times less risky than Gaztransport Technigaz. It trades about 0.11 of its potential returns per unit of risk. Gaztransport Technigaz SAS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,490  in Gaztransport Technigaz SAS on August 31, 2024 and sell it today you would earn a total of  370.00  from holding Gaztransport Technigaz SAS or generate 2.74% return on investment over 90 days.

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

Neoen SA  vs.  Gaztransport Technigaz SAS

Neoen SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neoen SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Neoen SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Gaztransport Technigaz

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SAS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gaztransport Technigaz is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Neoen SA and Gaztransport Technigaz

The main advantage of trading using opposite Neoen SA and Gaztransport Technigaz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neoen SA 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 Neoen 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .