Correlation Between Sodexo SA and Wendel

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

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

Diversification Opportunities for Sodexo SA and Wendel

-0.62

Correlation Coefficient

Sodexo SA  Wendel

Excellent diversification

The 3 months correlation between Sodexo and Wendel is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo SA and Wendel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wendel 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 Wendel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wendel has no effect on the direction of Sodexo SA i.e., Sodexo SA and Wendel go up and down completely randomly.

Pair Corralation between Sodexo SA and Wendel

Assuming the 90 days horizon Sodexo SA is expected to under-perform the Wendel. In addition to that, Sodexo SA is 1.17 times more volatile than Wendel. It trades about -0.03 of its total potential returns per unit of risk. Wendel is currently generating about 0.05 per unit of volatility. If you would invest  9,395  in Wendel on November 29, 2024 and sell it today you would earn a total of  320.00  from holding Wendel or generate 3.41% 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.  Wendel

Sodexo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sodexo SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Wendel

Risk-Adjusted Performance

Weak

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

Pair Trading with Sodexo SA and Wendel

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

The idea behind Sodexo SA and Wendel 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..