Correlation Between Stef SA and Dolfines SAS

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

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

Diversification Opportunities for Stef SA and Dolfines SAS

0.23

Correlation Coefficient

Stef SA  Dolfines SAS

Modest diversification

The 3 months correlation between Stef and Dolfines is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stef SA and Dolfines SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolfines SAS and Stef SA 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 Stef SA are associated (or correlated) with Dolfines SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolfines SAS has no effect on the direction of Stef SA i.e., Stef SA and Dolfines SAS go up and down completely randomly.

Pair Corralation between Stef SA and Dolfines SAS

Assuming the 90 days trading horizon Stef SA is expected to under-perform the Dolfines SAS. But the stock apears to be less risky and, when comparing its historical volatility, Stef SA is 6.24 times less risky than Dolfines SAS. The stock trades about -0.06 of its potential returns per unit of risk. The Dolfines SAS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  141.00  in Dolfines SAS on December 30, 2024 and sell it today you would earn a total of  159.00  from holding Dolfines SAS or generate 112.77% return on investment over 90 days.

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

Stef SA  vs.  Dolfines SAS

Stef SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stef SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Stef SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dolfines SAS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dolfines SAS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Dolfines SAS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stef SA and Dolfines SAS

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

The idea behind Stef SA and Dolfines SAS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.