Correlation Between Smcp SAS and Interparfums

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

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

Diversification Opportunities for Smcp SAS and Interparfums

-0.47

Correlation Coefficient

Smcp SAS  Interparfums

Very good diversification

The 3 months correlation between Smcp and Interparfums is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Smcp SAS and Interparfums SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interparfums SA and Smcp SAS 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 Smcp SAS are associated (or correlated) with Interparfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interparfums SA has no effect on the direction of Smcp SAS i.e., Smcp SAS and Interparfums go up and down completely randomly.

Pair Corralation between Smcp SAS and Interparfums

Assuming the 90 days trading horizon Smcp SAS is expected to generate 2.01 times more return on investment than Interparfums. However, Smcp SAS is 2.01 times more volatile than Interparfums SA. It trades about 0.18 of its potential returns per unit of risk. Interparfums SA is currently generating about -0.11 per unit of risk. If you would invest  255.00  in Smcp SAS on September 29, 2024 and sell it today you would earn a total of  104.00  from holding Smcp SAS or generate 40.78% return on investment over 90 days.

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

Smcp SAS  vs.  Interparfums SA

Smcp SAS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smcp SAS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Smcp SAS sustained solid returns over the last few months and may actually be approaching a breakup point.

Interparfums SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interparfums SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Smcp SAS and Interparfums

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

The idea behind Smcp SAS and Interparfums 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..