Correlation Between Compagnie and Nextedia

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

Diversification Opportunities for Compagnie and Nextedia

-0.44

Correlation Coefficient

Compagnie  Nextedia

Very good diversification

The 3 months correlation between Compagnie and Nextedia is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Nextedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextedia 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 Nextedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextedia has no effect on the direction of Compagnie i.e., Compagnie and Nextedia go up and down completely randomly.

Pair Corralation between Compagnie and Nextedia

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to under-perform the Nextedia. But the stock apears to be less risky and, when comparing its historical volatility, Compagnie de Saint Gobain is 3.42 times less risky than Nextedia. The stock trades about -0.09 of its potential returns per unit of risk. The Nextedia is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Nextedia on September 24, 2024 and sell it today you would lose (1.00) from holding Nextedia or give up 2.27% of portfolio value 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.  Nextedia

Compagnie de Saint

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nextedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextedia 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 Nextedia

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

The idea behind Compagnie de Saint Gobain and Nextedia 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.