Correlation Between Compagnie Des and Txcom SA

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

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

Diversification Opportunities for Compagnie Des and Txcom SA

0.67

Correlation Coefficient

Compagnie Des  Txcom SA

Poor diversification

The 3 months correlation between Compagnie and Txcom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie des Alpes and Txcom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Txcom SA and Compagnie Des 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 Compagnie des Alpes are associated (or correlated) with Txcom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Txcom SA has no effect on the direction of Compagnie Des i.e., Compagnie Des and Txcom SA go up and down completely randomly.

Pair Corralation between Compagnie Des and Txcom SA

Assuming the 90 days trading horizon Compagnie des Alpes is expected to generate 1.69 times more return on investment than Txcom SA. However, Compagnie Des is 1.69 times more volatile than Txcom SA. It trades about -0.07 of its potential returns per unit of risk. Txcom SA is currently generating about -0.16 per unit of risk. If you would invest  1,484  in Compagnie des Alpes on September 23, 2024 and sell it today you would lose (26.00) from holding Compagnie des Alpes or give up 1.75% of portfolio value over 90 days.

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

Compagnie des Alpes  vs.  Txcom SA

Compagnie des Alpes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie des Alpes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie Des is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Txcom SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Txcom SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Txcom SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Compagnie Des and Txcom SA

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

The idea behind Compagnie des Alpes and Txcom 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.