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

0.22

Correlation Coefficient

Safran SA  Dassault Aviation

Modest diversification

The 3 months correlation between Safran and Dassault is 0.22. 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 horizon Safran SA is expected to under-perform the Dassault Aviation. But the pink sheet apears to be less risky and, when comparing its historical volatility, Safran SA is 1.7 times less risky than Dassault Aviation. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Dassault Aviation SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,349  in Dassault Aviation SA on September 30, 2024 and sell it today you would earn a total of  271.00  from holding Dassault Aviation SA or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Safran SA  vs.  Dassault Aviation SA

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. In spite of fairly strong basic indicators, Safran SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dassault Aviation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Aviation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.