Correlation Between Compagnie and AGFA Gevaert

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

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

Diversification Opportunities for Compagnie and AGFA Gevaert

0.82

Correlation Coefficient

Compagnie  AGFA Gevaert

Very poor diversification

The 3 months correlation between Compagnie and AGFA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie du Bois and AGFA Gevaert NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGFA Gevaert NV and Compagnie 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 du Bois are associated (or correlated) with AGFA Gevaert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGFA Gevaert NV has no effect on the direction of Compagnie i.e., Compagnie and AGFA Gevaert go up and down completely randomly.

Pair Corralation between Compagnie and AGFA Gevaert

Assuming the 90 days trading horizon Compagnie du Bois is expected to generate 0.32 times more return on investment than AGFA Gevaert. However, Compagnie du Bois is 3.17 times less risky than AGFA Gevaert. It trades about -0.26 of its potential returns per unit of risk. AGFA Gevaert NV is currently generating about -0.18 per unit of risk. If you would invest  23,900  in Compagnie du Bois on August 31, 2024 and sell it today you would lose (2,400) from holding Compagnie du Bois or give up 10.04% of portfolio value over 90 days.

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

Compagnie du Bois  vs.  AGFA Gevaert NV

Compagnie du Bois

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie du Bois has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AGFA Gevaert NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGFA Gevaert NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Compagnie and AGFA Gevaert

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

The idea behind Compagnie du Bois and AGFA Gevaert NV 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 Stocks Directory module to find actively traded stocks across global markets.