Correlation Between Technip Energies and Compagnie

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Can any of the company-specific risk be diversified away by investing in both Technip Energies and Compagnie 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 Technip Energies and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technip Energies BV and Compagnie de Chemins, you can compare the effects of market volatilities on Technip Energies and Compagnie 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 Technip Energies with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technip Energies and Compagnie.

Diversification Opportunities for Technip Energies and Compagnie

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Technip and Compagnie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Technip Energies BV and Compagnie de Chemins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Chemins and Technip Energies 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 Technip Energies BV are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Chemins has no effect on the direction of Technip Energies i.e., Technip Energies and Compagnie go up and down completely randomly.

Pair Corralation between Technip Energies and Compagnie

Assuming the 90 days horizon Technip Energies is expected to generate 1.07 times less return on investment than Compagnie. In addition to that, Technip Energies is 1.17 times more volatile than Compagnie de Chemins. It trades about 0.04 of its total potential returns per unit of risk. Compagnie de Chemins is currently generating about 0.06 per unit of volatility. If you would invest  66,563  in Compagnie de Chemins on September 23, 2024 and sell it today you would earn a total of  23,437  from holding Compagnie de Chemins or generate 35.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.44%
ValuesDaily Returns

Technip Energies BV  vs.  Compagnie de Chemins

 Performance 
       Timeline  
Technip Energies 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Technip Energies BV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Technip Energies sustained solid returns over the last few months and may actually be approaching a breakup point.
Compagnie de Chemins 

Risk-Adjusted Performance

12 of 100

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

Technip Energies and Compagnie Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Technip Energies and Compagnie

The main advantage of trading using opposite Technip Energies and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technip Energies position performs unexpectedly, Compagnie 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 Compagnie will offset losses from the drop in Compagnie's long position.
The idea behind Technip Energies BV and Compagnie de Chemins 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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