Correlation Between Safran SA and Thales SA

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

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

Diversification Opportunities for Safran SA and Thales SA

0.56

Correlation Coefficient

Safran SA  Thales SA

Very weak diversification

The 3 months correlation between Safran and Thales is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of Safran SA i.e., Safran SA and Thales SA go up and down completely randomly.

Pair Corralation between Safran SA and Thales SA

Assuming the 90 days horizon Safran SA is expected to generate 1.29 times more return on investment than Thales SA. However, Safran SA is 1.29 times more volatile than Thales SA ADR. It trades about 0.02 of its potential returns per unit of risk. Thales SA ADR is currently generating about -0.05 per unit of risk. If you would invest  21,612  in Safran SA on September 29, 2024 and sell it today you would earn a total of  282.00  from holding Safran SA or generate 1.3% return on investment over 90 days.

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

Safran SA  vs.  Thales SA ADR

Safran SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safran SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Safran SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Thales SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Safran SA and Thales SA

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

The idea behind Safran SA and Thales SA ADR 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.