Correlation Between Safran SA and VirTra

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

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

Diversification Opportunities for Safran SA and VirTra

-0.78

Correlation Coefficient

Safran SA  VirTra

Pay attention - limited upside

The 3 months correlation between Safran and VirTra is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc 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 VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of Safran SA i.e., Safran SA and VirTra go up and down completely randomly.

Pair Corralation between Safran SA and VirTra

Assuming the 90 days horizon Safran SA is expected to generate 0.69 times more return on investment than VirTra. However, Safran SA is 1.45 times less risky than VirTra. It trades about 0.2 of its potential returns per unit of risk. VirTra Inc is currently generating about -0.15 per unit of risk. If you would invest  5,474  in Safran SA on December 29, 2024 and sell it today you would earn a total of  1,182  from holding Safran SA or generate 21.59% return on investment over 90 days.

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

Safran SA  vs.  VirTra Inc

Safran SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Safran SA showed solid returns over the last few months and may actually be approaching a breakup point.

VirTra Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days VirTra Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Safran SA and VirTra

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

The idea behind Safran SA and VirTra Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.