Correlation Between Stef SA and Groupe Sfpi

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

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

Diversification Opportunities for Stef SA and Groupe Sfpi

-0.11

Correlation Coefficient

Stef SA  Groupe Sfpi

Good diversification

The 3 months correlation between Stef and Groupe is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stef SA and Groupe Sfpi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupe Sfpi 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 Groupe Sfpi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupe Sfpi has no effect on the direction of Stef SA i.e., Stef SA and Groupe Sfpi go up and down completely randomly.

Pair Corralation between Stef SA and Groupe Sfpi

Assuming the 90 days trading horizon Stef SA is expected to generate 0.88 times more return on investment than Groupe Sfpi. However, Stef SA is 1.14 times less risky than Groupe Sfpi. It trades about -0.06 of its potential returns per unit of risk. Groupe Sfpi is currently generating about -0.05 per unit of risk. If you would invest  12,960  in Stef SA on December 29, 2024 and sell it today you would lose (840.00) from holding Stef SA or give up 6.48% of portfolio value over 90 days.

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

Stef SA  vs.  Groupe Sfpi

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.

Groupe Sfpi

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stef SA and Groupe Sfpi

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

The idea behind Stef SA and Groupe Sfpi 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.