Correlation Between Bourse Direct and I2S SA

Can any of the company-specific risk be diversified away by investing in both Bourse Direct and I2S SA 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 Bourse Direct and I2S SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bourse Direct SA and i2S SA, you can compare the effects of market volatilities on Bourse Direct and I2S SA 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 Bourse Direct with a short position of I2S SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bourse Direct and I2S SA.

Diversification Opportunities for Bourse Direct and I2S SA

-0.65

Correlation Coefficient

Bourse Direct  I2S SA

Excellent diversification

The 3 months correlation between Bourse and I2S is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bourse Direct SA and i2S SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i2S SA and Bourse Direct 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 Bourse Direct SA are associated (or correlated) with I2S SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i2S SA has no effect on the direction of Bourse Direct i.e., Bourse Direct and I2S SA go up and down completely randomly.

Pair Corralation between Bourse Direct and I2S SA

Assuming the 90 days trading horizon Bourse Direct SA is expected to under-perform the I2S SA. But the stock apears to be less risky and, when comparing its historical volatility, Bourse Direct SA is 2.23 times less risky than I2S SA. The stock trades about -0.18 of its potential returns per unit of risk. The i2S SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  750.00  in i2S SA on September 12, 2024 and sell it today you would earn a total of  60.00  from holding i2S SA or generate 8.0% return on investment over 90 days.

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

Bourse Direct SA  vs.  i2S SA

Bourse Direct SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bourse Direct SA 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 fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

i2S SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in i2S SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, I2S SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bourse Direct and I2S SA

The main advantage of trading using opposite Bourse Direct and I2S SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bourse Direct position performs unexpectedly, I2S SA 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 I2S SA will offset losses from the drop in I2S SA's long position.

The idea behind Bourse Direct SA and i2S SA 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.