Correlation Between Renault SA and Compagnie Generale

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

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

Diversification Opportunities for Renault SA and Compagnie Generale

0.83

Correlation Coefficient

Renault SA  Compagnie Generale

Very poor diversification

The 3 months correlation between Renault and Compagnie is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Compagnie Generale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Generale des and Renault 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 Renault SA are associated (or correlated) with Compagnie Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Generale des has no effect on the direction of Renault SA i.e., Renault SA and Compagnie Generale go up and down completely randomly.

Pair Corralation between Renault SA and Compagnie Generale

Assuming the 90 days trading horizon Renault SA is expected to generate 1.22 times more return on investment than Compagnie Generale. However, Renault SA is 1.22 times more volatile than Compagnie Generale des. It trades about 0.21 of its potential returns per unit of risk. Compagnie Generale des is currently generating about 0.12 per unit of risk. If you would invest  4,164  in Renault SA on December 4, 2024 and sell it today you would earn a total of  890.00  from holding Renault SA or generate 21.37% return on investment over 90 days.

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

Renault SA  vs.  Compagnie Generale des

Renault SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renault SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Generale des

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Generale des are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie Generale may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Renault SA and Compagnie Generale

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

The idea behind Renault SA and Compagnie Generale des 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.