Correlation Between Dassault Systemes and Thales SA

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

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

Diversification Opportunities for Dassault Systemes and Thales SA

-0.46

Correlation Coefficient

Dassault Systemes  Thales SA

Very good diversification

The 3 months correlation between Dassault and Thales is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systemes SE and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and Dassault Systemes 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 Dassault Systemes SE are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Dassault Systemes i.e., Dassault Systemes and Thales SA go up and down completely randomly.

Pair Corralation between Dassault Systemes and Thales SA

Assuming the 90 days trading horizon Dassault Systemes SE is expected to under-perform the Thales SA. In addition to that, Dassault Systemes is 1.0 times more volatile than Thales SA. It trades about -0.08 of its total potential returns per unit of risk. Thales SA is currently generating about -0.07 per unit of volatility. If you would invest  15,200  in Thales SA on August 30, 2024 and sell it today you would lose (1,200) from holding Thales SA or give up 7.89% of portfolio value over 90 days.

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

Dassault Systemes SE  vs.  Thales SA

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systemes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dassault Systemes and Thales SA

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

The idea behind Dassault Systemes SE and Thales SA 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.