Correlation Between Vinci SA and Compagnie

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

By analyzing existing cross correlation between Vinci SA ADR and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Vinci SA 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 Vinci SA with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vinci SA and Compagnie.

Diversification Opportunities for Vinci SA and Compagnie

0.05

Correlation Coefficient

Vinci SA  Compagnie

Significant diversification

The 3 months correlation between Vinci and Compagnie is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vinci SA ADR and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Vinci SA 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 Vinci SA ADR 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 Saint has no effect on the direction of Vinci SA i.e., Vinci SA and Compagnie go up and down completely randomly.

Pair Corralation between Vinci SA and Compagnie

Assuming the 90 days horizon Vinci SA ADR is expected to under-perform the Compagnie. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vinci SA ADR is 1.12 times less risky than Compagnie. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Compagnie de Saint Gobain is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,701  in Compagnie de Saint Gobain on October 9, 2024 and sell it today you would earn a total of  78.00  from holding Compagnie de Saint Gobain or generate 4.59% return on investment over 90 days.

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

Vinci SA ADR  vs.  Compagnie de Saint Gobain

Vinci SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Compagnie de Saint

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie de Saint Gobain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Compagnie is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vinci SA and Compagnie

The main advantage of trading using opposite Vinci SA and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vinci SA 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 Vinci SA ADR and Compagnie de Saint Gobain 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.