Correlation Between Tikehau Capital and ABC Arbitrage

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

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

Diversification Opportunities for Tikehau Capital and ABC Arbitrage

-0.35

Correlation Coefficient

Tikehau Capital  ABC Arbitrage

Very good diversification

The 3 months correlation between Tikehau and ABC is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tikehau Capital and ABC arbitrage SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC arbitrage SA and Tikehau Capital 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 Tikehau Capital are associated (or correlated) with ABC Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC arbitrage SA has no effect on the direction of Tikehau Capital i.e., Tikehau Capital and ABC Arbitrage go up and down completely randomly.

Pair Corralation between Tikehau Capital and ABC Arbitrage

Assuming the 90 days trading horizon Tikehau Capital is expected to under-perform the ABC Arbitrage. In addition to that, Tikehau Capital is 1.31 times more volatile than ABC arbitrage SA. It trades about -0.03 of its total potential returns per unit of risk. ABC arbitrage SA is currently generating about 0.28 per unit of volatility. If you would invest  476.00  in ABC arbitrage SA on December 30, 2024 and sell it today you would earn a total of  92.00  from holding ABC arbitrage SA or generate 19.33% return on investment over 90 days.

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

Tikehau Capital  vs.  ABC arbitrage SA

Tikehau Capital

Risk-Adjusted Performance

Very Weak

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

ABC arbitrage SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABC arbitrage SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABC Arbitrage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tikehau Capital and ABC Arbitrage

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

The idea behind Tikehau Capital and ABC arbitrage 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.