Correlation Between Compagnie Financire and AECI

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

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

Diversification Opportunities for Compagnie Financire and AECI

-0.4

Correlation Coefficient

Compagnie Financire  AECI

Very good diversification

The 3 months correlation between Compagnie and AECI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and AECI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECI and Compagnie Financire 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 Financire Richemont are associated (or correlated) with AECI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECI has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and AECI go up and down completely randomly.

Pair Corralation between Compagnie Financire and AECI

Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to under-perform the AECI. In addition to that, Compagnie Financire is 1.43 times more volatile than AECI. It trades about -0.06 of its total potential returns per unit of risk. AECI is currently generating about 0.02 per unit of volatility. If you would invest  148,000  in AECI on September 3, 2024 and sell it today you would earn a total of  2,100  from holding AECI or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Compagnie Financire Richemont  vs.  AECI

Compagnie Financire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Financire Richemont has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

AECI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AECI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AECI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Compagnie Financire and AECI

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

The idea behind Compagnie Financire Richemont and AECI 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.