Correlation Between Compagnie and Safran SA

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

Diversification Opportunities for Compagnie and Safran SA

0.85

Correlation Coefficient

Compagnie  Safran SA

Very poor diversification

The 3 months correlation between Compagnie and Safran is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Compagnie i.e., Compagnie and Safran SA go up and down completely randomly.

Pair Corralation between Compagnie and Safran SA

Assuming the 90 days trading horizon Compagnie is expected to generate 1.15 times less return on investment than Safran SA. In addition to that, Compagnie is 1.45 times more volatile than Safran SA. It trades about 0.1 of its total potential returns per unit of risk. Safran SA is currently generating about 0.16 per unit of volatility. If you would invest  21,210  in Safran SA on December 31, 2024 and sell it today you would earn a total of  3,360  from holding Safran SA or generate 15.84% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Safran 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 7 (%) 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.

Safran SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Safran SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Safran SA

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

The idea behind Compagnie de Saint Gobain and Safran 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 CEOs Directory module to screen CEOs from public companies around the world.