Correlation Between Boiron SA and Compagnie Financire

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

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

Diversification Opportunities for Boiron SA and Compagnie Financire

-0.26

Correlation Coefficient

Boiron SA  Compagnie Financire

Very good diversification

The 3 months correlation between Boiron and Compagnie is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Boiron SA and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire and Boiron 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 Boiron SA are associated (or correlated) with Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Boiron SA i.e., Boiron SA and Compagnie Financire go up and down completely randomly.

Pair Corralation between Boiron SA and Compagnie Financire

Assuming the 90 days horizon Boiron SA is expected to under-perform the Compagnie Financire. But the stock apears to be less risky and, when comparing its historical volatility, Boiron SA is 1.54 times less risky than Compagnie Financire. The stock trades about -0.09 of its potential returns per unit of risk. The Compagnie Financire Richemont is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Compagnie Financire Richemont on September 22, 2024 and sell it today you would earn a total of  250.00  from holding Compagnie Financire Richemont or generate 21.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Boiron SA  vs.  Compagnie Financire Richemont

Boiron SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boiron SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Compagnie Financire

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie Financire reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boiron SA and Compagnie Financire

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

The idea behind Boiron SA and Compagnie Financire Richemont 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.