Correlation Between Touax SCA and Compagnie

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

By analyzing existing cross correlation between Touax SCA and Compagnie Du Mont Blanc, you can compare the effects of market volatilities on Touax SCA 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 Touax SCA with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touax SCA and Compagnie.

Diversification Opportunities for Touax SCA and Compagnie

0.77

Correlation Coefficient

Touax SCA  Compagnie

Poor diversification

The 3 months correlation between Touax and Compagnie is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Touax SCA and Compagnie Du Mont Blanc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Du Mont and Touax SCA 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 Touax SCA 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 Du Mont has no effect on the direction of Touax SCA i.e., Touax SCA and Compagnie go up and down completely randomly.

Pair Corralation between Touax SCA and Compagnie

Assuming the 90 days trading horizon Touax SCA is expected to generate 1.86 times more return on investment than Compagnie. However, Touax SCA is 1.86 times more volatile than Compagnie Du Mont Blanc. It trades about 0.13 of its potential returns per unit of risk. Compagnie Du Mont Blanc is currently generating about 0.11 per unit of risk. If you would invest  373.00  in Touax SCA on December 30, 2024 and sell it today you would earn a total of  72.00  from holding Touax SCA or generate 19.3% return on investment over 90 days.

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

Touax SCA  vs.  Compagnie Du Mont Blanc

Touax SCA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touax SCA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Touax SCA sustained solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Du Mont

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Du Mont Blanc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Touax SCA and Compagnie

The main advantage of trading using opposite Touax SCA and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touax SCA 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 Touax SCA and Compagnie Du Mont Blanc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.