Correlation Between Groupe LDLC and Cnova NV

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

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

Diversification Opportunities for Groupe LDLC and Cnova NV

0.73

Correlation Coefficient

Groupe LDLC  Cnova NV

Poor diversification

The 3 months correlation between Groupe and Cnova is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Groupe LDLC SA and Cnova NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cnova NV and Groupe LDLC 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 Groupe LDLC SA are associated (or correlated) with Cnova NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cnova NV has no effect on the direction of Groupe LDLC i.e., Groupe LDLC and Cnova NV go up and down completely randomly.

Pair Corralation between Groupe LDLC and Cnova NV

Assuming the 90 days trading horizon Groupe LDLC SA is expected to under-perform the Cnova NV. But the stock apears to be less risky and, when comparing its historical volatility, Groupe LDLC SA is 8.8 times less risky than Cnova NV. The stock trades about -0.15 of its potential returns per unit of risk. The Cnova NV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  221.00  in Cnova NV on September 2, 2024 and sell it today you would lose (141.00) from holding Cnova NV or give up 63.8% of portfolio value over 90 days.

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

Groupe LDLC SA  vs.  Cnova NV

Groupe LDLC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groupe LDLC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cnova NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cnova NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cnova NV sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Groupe LDLC and Cnova NV

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

The idea behind Groupe LDLC SA and Cnova NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.