Correlation Between SCOR SE and Touax SCA

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

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

Diversification Opportunities for SCOR SE and Touax SCA

0.83

Correlation Coefficient

SCOR SE  Touax SCA

Very poor diversification

The 3 months correlation between SCOR and Touax is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SCOR SE and Touax SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touax SCA and SCOR SE 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 SCOR SE are associated (or correlated) with Touax SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touax SCA has no effect on the direction of SCOR SE i.e., SCOR SE and Touax SCA go up and down completely randomly.

Pair Corralation between SCOR SE and Touax SCA

Assuming the 90 days trading horizon SCOR SE is expected to generate 1.07 times less return on investment than Touax SCA. But when comparing it to its historical volatility, SCOR SE is 1.57 times less risky than Touax SCA. It trades about 0.2 of its potential returns per unit of risk. Touax SCA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  373.00  in Touax SCA on December 28, 2024 and sell it today you would earn a total of  72.00  from holding Touax SCA or generate 19.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

SCOR SE  vs.  Touax SCA

SCOR SE

Risk-Adjusted Performance

Good

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

Touax SCA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touax SCA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Touax SCA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCOR SE and Touax SCA

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

The idea behind SCOR SE and Touax SCA 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.