Correlation Between Compagnie and Herige SA

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

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

Diversification Opportunities for Compagnie and Herige SA

-0.53

Correlation Coefficient

Compagnie  Herige SA

Excellent diversification

The 3 months correlation between Compagnie and Herige is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Herige SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herige SA and Compagnie 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 Compagnie de Saint Gobain are associated (or correlated) with Herige SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herige SA has no effect on the direction of Compagnie i.e., Compagnie and Herige SA go up and down completely randomly.

Pair Corralation between Compagnie and Herige SA

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.59 times more return on investment than Herige SA. However, Compagnie de Saint Gobain is 1.7 times less risky than Herige SA. It trades about 0.12 of its potential returns per unit of risk. Herige SA is currently generating about 0.0 per unit of risk. If you would invest  8,626  in Compagnie de Saint Gobain on December 4, 2024 and sell it today you would earn a total of  960.00  from holding Compagnie de Saint Gobain or generate 11.13% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Herige SA

Compagnie de Saint

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Herige SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Herige SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Herige SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Compagnie and Herige SA

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

The idea behind Compagnie de Saint Gobain and Herige 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.