Correlation Between Compagnie and Invibes Advertising

Can any of the company-specific risk be diversified away by investing in both Compagnie and Invibes Advertising 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 Invibes Advertising 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 Invibes Advertising NV, you can compare the effects of market volatilities on Compagnie and Invibes Advertising 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 Invibes Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Invibes Advertising.

Diversification Opportunities for Compagnie and Invibes Advertising

-0.82

Correlation Coefficient

Compagnie  Invibes Advertising

Pay attention - limited upside

The 3 months correlation between Compagnie and Invibes is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Invibes Advertising NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invibes Advertising 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 Invibes Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invibes Advertising has no effect on the direction of Compagnie i.e., Compagnie and Invibes Advertising go up and down completely randomly.

Pair Corralation between Compagnie and Invibes Advertising

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.61 times more return on investment than Invibes Advertising. However, Compagnie de Saint Gobain is 1.63 times less risky than Invibes Advertising. It trades about 0.14 of its potential returns per unit of risk. Invibes Advertising NV is currently generating about -0.32 per unit of risk. If you would invest  7,866  in Compagnie de Saint Gobain on September 14, 2024 and sell it today you would earn a total of  1,044  from holding Compagnie de Saint Gobain or generate 13.27% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Invibes Advertising NV

Compagnie de Saint

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Invibes Advertising

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invibes Advertising NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Compagnie and Invibes Advertising

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

The idea behind Compagnie de Saint Gobain and Invibes Advertising NV 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.