Correlation Between Carrefour and Valeo SA

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

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

Diversification Opportunities for Carrefour and Valeo SA

0.63

Correlation Coefficient

Carrefour  Valeo SA

Poor diversification

The 3 months correlation between Carrefour and Valeo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Carrefour SA and Valeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeo SA and Carrefour 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 Carrefour SA are associated (or correlated) with Valeo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeo SA has no effect on the direction of Carrefour i.e., Carrefour and Valeo SA go up and down completely randomly.

Pair Corralation between Carrefour and Valeo SA

Assuming the 90 days horizon Carrefour SA is expected to generate 0.36 times more return on investment than Valeo SA. However, Carrefour SA is 2.81 times less risky than Valeo SA. It trades about -0.01 of its potential returns per unit of risk. Valeo SA is currently generating about -0.23 per unit of risk. If you would invest  1,444  in Carrefour SA on August 31, 2024 and sell it today you would lose (4.00) from holding Carrefour SA or give up 0.28% of portfolio value over 90 days.

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

Carrefour SA  vs.  Valeo SA

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carrefour is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Valeo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valeo 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 basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Carrefour and Valeo SA

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

The idea behind Carrefour SA and Valeo 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..