Correlation Between Campine and Compagnie

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

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

Diversification Opportunities for Campine and Compagnie

-0.58

Correlation Coefficient

Campine  Compagnie

Excellent diversification

The 3 months correlation between Campine and Compagnie is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Campine and Compagnie du Bois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie du Bois and Campine 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 Campine 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 du Bois has no effect on the direction of Campine i.e., Campine and Compagnie go up and down completely randomly.

Pair Corralation between Campine and Compagnie

Assuming the 90 days trading horizon Campine is expected to generate 1.26 times more return on investment than Compagnie. However, Campine is 1.26 times more volatile than Compagnie du Bois. It trades about 0.07 of its potential returns per unit of risk. Compagnie du Bois is currently generating about -0.24 per unit of risk. If you would invest  8,600  in Campine on September 5, 2024 and sell it today you would earn a total of  600.00  from holding Campine or generate 6.98% return on investment over 90 days.

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

Campine  vs.  Compagnie du Bois

Campine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Campine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Campine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compagnie du Bois

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie du Bois 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.

Pair Trading with Campine and Compagnie

The main advantage of trading using opposite Campine and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Campine 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 Campine and Compagnie du Bois 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.