Correlation Between Compagnie Financire and Moncler SpA

Can any of the company-specific risk be diversified away by investing in both Compagnie Financire and Moncler SpA 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 Moncler SpA 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 Moncler SpA, you can compare the effects of market volatilities on Compagnie Financire and Moncler SpA 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 Moncler SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financire and Moncler SpA.

Diversification Opportunities for Compagnie Financire and Moncler SpA

0.44

Correlation Coefficient

Compagnie Financire  Moncler SpA

Very weak diversification

The 3 months correlation between Compagnie and Moncler is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Moncler SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moncler SpA 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 Moncler SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moncler SpA has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and Moncler SpA go up and down completely randomly.

Pair Corralation between Compagnie Financire and Moncler SpA

Assuming the 90 days horizon Compagnie Financire Richemont is expected to generate 1.04 times more return on investment than Moncler SpA. However, Compagnie Financire is 1.04 times more volatile than Moncler SpA. It trades about 0.01 of its potential returns per unit of risk. Moncler SpA is currently generating about -0.04 per unit of risk. If you would invest  15,109  in Compagnie Financire Richemont on September 14, 2024 and sell it today you would lose (8.00) from holding Compagnie Financire Richemont or give up 0.05% of portfolio value over 90 days.

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

Compagnie Financire Richemont  vs.  Moncler SpA

Compagnie Financire

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Compagnie Financire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Moncler SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moncler SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Moncler SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compagnie Financire and Moncler SpA

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

The idea behind Compagnie Financire Richemont and Moncler SpA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.