Correlation Between Sodexo SA and Herige SA

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

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

Diversification Opportunities for Sodexo SA and Herige SA

-0.68

Correlation Coefficient

Sodexo SA  Herige SA

Excellent diversification

The 3 months correlation between Sodexo and Herige is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo SA and Herige SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herige SA and Sodexo 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 Sodexo SA are associated (or correlated) with Herige SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herige SA has no effect on the direction of Sodexo SA i.e., Sodexo SA and Herige SA go up and down completely randomly.

Pair Corralation between Sodexo SA and Herige SA

Assuming the 90 days horizon Sodexo SA is expected to under-perform the Herige SA. But the stock apears to be less risky and, when comparing its historical volatility, Sodexo SA is 2.19 times less risky than Herige SA. The stock trades about -0.08 of its potential returns per unit of risk. The Herige SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Herige SA on September 13, 2024 and sell it today you would earn a total of  150.00  from holding Herige SA or generate 6.25% return on investment over 90 days.

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

Sodexo SA  vs.  Herige SA

Sodexo SA

Risk-Adjusted Performance

3 of 100

Insignificant

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

Herige SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herige SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Herige SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sodexo SA and Herige SA

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

The idea behind Sodexo SA and Herige 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.