Correlation Between STORE ELECTRONIC and Carmat SA

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

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

Diversification Opportunities for STORE ELECTRONIC and Carmat SA

-0.26

Correlation Coefficient

STORE ELECTRONIC  Carmat SA

Very good diversification

The 3 months correlation between STORE and Carmat is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and Carmat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat SA and STORE ELECTRONIC 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 STORE ELECTRONIC are associated (or correlated) with Carmat SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat SA has no effect on the direction of STORE ELECTRONIC i.e., STORE ELECTRONIC and Carmat SA go up and down completely randomly.

Pair Corralation between STORE ELECTRONIC and Carmat SA

Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 0.59 times more return on investment than Carmat SA. However, STORE ELECTRONIC is 1.69 times less risky than Carmat SA. It trades about 0.13 of its potential returns per unit of risk. Carmat SA is currently generating about -0.04 per unit of risk. If you would invest  14,460  in STORE ELECTRONIC on October 5, 2024 and sell it today you would earn a total of  2,910  from holding STORE ELECTRONIC or generate 20.12% return on investment over 90 days.

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

STORE ELECTRONIC  vs.  Carmat SA

STORE ELECTRONIC

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days STORE ELECTRONIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain primary indicators, STORE ELECTRONIC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with STORE ELECTRONIC and Carmat SA

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

The idea behind STORE ELECTRONIC and Carmat 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.