Correlation Between SBF 120 and Groupe Tera

Can any of the company-specific risk be diversified away by investing in both SBF 120 and Groupe Tera 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 SBF 120 and Groupe Tera into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SBF 120 and Groupe Tera SA, you can compare the effects of market volatilities on SBF 120 and Groupe Tera 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 SBF 120 with a short position of Groupe Tera. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBF 120 and Groupe Tera.

Diversification Opportunities for SBF 120 and Groupe Tera

0.7

Correlation Coefficient

SBF 120  Groupe Tera

Poor diversification

The 3 months correlation between SBF and Groupe is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SBF 120 and Groupe Tera SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupe Tera SA and SBF 120 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 SBF 120 are associated (or correlated) with Groupe Tera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupe Tera SA has no effect on the direction of SBF 120 i.e., SBF 120 and Groupe Tera go up and down completely randomly.

Pair Corralation between SBF 120 and Groupe Tera

Assuming the 90 days trading horizon SBF 120 is expected to generate 5.94 times less return on investment than Groupe Tera. But when comparing it to its historical volatility, SBF 120 is 11.22 times less risky than Groupe Tera. It trades about 0.26 of its potential returns per unit of risk. Groupe Tera SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  187.00  in Groupe Tera SA on December 3, 2024 and sell it today you would earn a total of  125.00  from holding Groupe Tera SA or generate 66.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

SBF 120  vs.  Groupe Tera SA

Pair Trading with SBF 120 and Groupe Tera

The main advantage of trading using opposite SBF 120 and Groupe Tera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBF 120 position performs unexpectedly, Groupe Tera 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 Groupe Tera will offset losses from the drop in Groupe Tera's long position.

The idea behind SBF 120 and Groupe Tera 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.