Correlation Between Transgene and Avenir Telecom

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

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

Diversification Opportunities for Transgene and Avenir Telecom

0.8

Correlation Coefficient

Transgene  Avenir Telecom

Very poor diversification

The 3 months correlation between Transgene and Avenir is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Transgene SA and Avenir Telecom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenir Telecom SA and Transgene 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 Transgene SA are associated (or correlated) with Avenir Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenir Telecom SA has no effect on the direction of Transgene i.e., Transgene and Avenir Telecom go up and down completely randomly.

Pair Corralation between Transgene and Avenir Telecom

Assuming the 90 days trading horizon Transgene SA is expected to under-perform the Avenir Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Transgene SA is 1.32 times less risky than Avenir Telecom. The stock trades about -0.14 of its potential returns per unit of risk. The Avenir Telecom SA is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Avenir Telecom SA on September 7, 2024 and sell it today you would lose (4.79) from holding Avenir Telecom SA or give up 39.92% of portfolio value over 90 days.

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

Transgene SA  vs.  Avenir Telecom SA

Transgene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transgene SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Avenir Telecom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avenir Telecom SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Transgene and Avenir Telecom

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

The idea behind Transgene SA and Avenir Telecom 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.