Correlation Between Derichebourg and Seche Environnem

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

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

Diversification Opportunities for Derichebourg and Seche Environnem

0.56

Correlation Coefficient

Derichebourg  Seche Environnem

Very weak diversification

The 3 months correlation between Derichebourg and Seche is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Seche Environnem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnem and Derichebourg 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 Derichebourg are associated (or correlated) with Seche Environnem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnem has no effect on the direction of Derichebourg i.e., Derichebourg and Seche Environnem go up and down completely randomly.

Pair Corralation between Derichebourg and Seche Environnem

Assuming the 90 days trading horizon Derichebourg is expected to generate 1.59 times more return on investment than Seche Environnem. However, Derichebourg is 1.59 times more volatile than Seche Environnem. It trades about 0.0 of its potential returns per unit of risk. Seche Environnem is currently generating about -0.17 per unit of risk. If you would invest  523.00  in Derichebourg on September 15, 2024 and sell it today you would lose (11.00) from holding Derichebourg or give up 2.1% of portfolio value over 90 days.

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

Derichebourg  vs.  Seche Environnem

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

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

Seche Environnem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnem 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 Derichebourg and Seche Environnem

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

The idea behind Derichebourg and Seche Environnem 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .