Correlation Between Touax SCA and Vetoquinol

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

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

Diversification Opportunities for Touax SCA and Vetoquinol

0.81

Correlation Coefficient

Touax SCA  Vetoquinol

Very poor diversification

The 3 months correlation between Touax and Vetoquinol is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Touax SCA and Vetoquinol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vetoquinol 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 Vetoquinol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vetoquinol has no effect on the direction of Touax SCA i.e., Touax SCA and Vetoquinol go up and down completely randomly.

Pair Corralation between Touax SCA and Vetoquinol

Assuming the 90 days trading horizon Touax SCA is expected to under-perform the Vetoquinol. But the stock apears to be less risky and, when comparing its historical volatility, Touax SCA is 1.05 times less risky than Vetoquinol. The stock trades about -0.31 of its potential returns per unit of risk. The Vetoquinol is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  8,220  in Vetoquinol on October 20, 2024 and sell it today you would lose (1,360) from holding Vetoquinol or give up 16.55% of portfolio value over 90 days.

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

Touax SCA  vs.  Vetoquinol

Touax SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touax SCA 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vetoquinol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vetoquinol 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Touax SCA and Vetoquinol

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

The idea behind Touax SCA and Vetoquinol 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.