Correlation Between Compagnie Financire and Salvatore Ferragamo

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

Diversification Opportunities for Compagnie Financire and Salvatore Ferragamo

0.49

Correlation Coefficient

Compagnie Financire  Salvatore Ferragamo

Very weak diversification

The 3 months correlation between Compagnie and Salvatore is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo 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 Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Compagnie Financire and Salvatore Ferragamo

Assuming the 90 days horizon Compagnie Financire Richemont is expected to generate 0.64 times more return on investment than Salvatore Ferragamo. However, Compagnie Financire Richemont is 1.55 times less risky than Salvatore Ferragamo. It trades about 0.08 of its potential returns per unit of risk. Salvatore Ferragamo SpA is currently generating about 0.02 per unit of risk. If you would invest  13,273  in Compagnie Financire Richemont on September 12, 2024 and sell it today you would earn a total of  1,683  from holding Compagnie Financire Richemont or generate 12.68% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  Salvatore Ferragamo SpA

Compagnie Financire

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Compagnie Financire Richemont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical indicators, Compagnie Financire reported solid returns over the last few months and may actually be approaching a breakup point.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salvatore Ferragamo SpA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Salvatore Ferragamo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compagnie Financire and Salvatore Ferragamo

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

The idea behind Compagnie Financire Richemont and Salvatore Ferragamo 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.