Correlation Between Safran SA and Dassault Aviation

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

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

Diversification Opportunities for Safran SA and Dassault Aviation

0.74

Correlation Coefficient

Safran SA  Dassault Aviation

Poor diversification

The 3 months correlation between Safran and Dassault is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation and Safran 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 Safran SA are associated (or correlated) with Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Safran SA i.e., Safran SA and Dassault Aviation go up and down completely randomly.

Pair Corralation between Safran SA and Dassault Aviation

Assuming the 90 days trading horizon Safran SA is expected to generate 2.94 times less return on investment than Dassault Aviation. But when comparing it to its historical volatility, Safran SA is 1.7 times less risky than Dassault Aviation. It trades about 0.17 of its potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  19,580  in Dassault Aviation SA on December 30, 2024 and sell it today you would earn a total of  11,320  from holding Dassault Aviation SA or generate 57.81% return on investment over 90 days.

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

Safran SA  vs.  Dassault Aviation SA

Safran SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Safran SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Dassault Aviation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dassault Aviation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safran SA and Dassault Aviation

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

The idea behind Safran SA and Dassault Aviation 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.