Correlation Between Christian Dior and Mercialys

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

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

Diversification Opportunities for Christian Dior and Mercialys

0.46

Correlation Coefficient

Christian Dior  Mercialys

Very weak diversification

The 3 months correlation between Christian and Mercialys is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Christian Dior SE and Mercialys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercialys SA and Christian Dior 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 Christian Dior SE are associated (or correlated) with Mercialys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercialys SA has no effect on the direction of Christian Dior i.e., Christian Dior and Mercialys go up and down completely randomly.

Pair Corralation between Christian Dior and Mercialys

Assuming the 90 days trading horizon Christian Dior SE is expected to generate 1.25 times more return on investment than Mercialys. However, Christian Dior is 1.25 times more volatile than Mercialys SA. It trades about -0.05 of its potential returns per unit of risk. Mercialys SA is currently generating about -0.2 per unit of risk. If you would invest  64,203  in Christian Dior SE on September 30, 2024 and sell it today you would lose (4,253) from holding Christian Dior SE or give up 6.62% of portfolio value over 90 days.

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

Christian Dior SE  vs.  Mercialys SA

Christian Dior SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mercialys SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercialys 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Christian Dior and Mercialys

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

The idea behind Christian Dior SE and Mercialys 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.