Correlation Between Elis SA and Fnac Darty

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

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

Diversification Opportunities for Elis SA and Fnac Darty

-0.48

Correlation Coefficient

Elis SA  Fnac Darty

Very good diversification

The 3 months correlation between Elis and Fnac is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Elis SA and Fnac Darty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fnac Darty SA and Elis SA 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 Elis SA are associated (or correlated) with Fnac Darty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fnac Darty SA has no effect on the direction of Elis SA i.e., Elis SA and Fnac Darty go up and down completely randomly.

Pair Corralation between Elis SA and Fnac Darty

Assuming the 90 days trading horizon Elis SA is expected to generate 0.89 times more return on investment than Fnac Darty. However, Elis SA is 1.12 times less risky than Fnac Darty. It trades about -0.03 of its potential returns per unit of risk. Fnac Darty SA is currently generating about -0.05 per unit of risk. If you would invest  1,969  in Elis SA on September 26, 2024 and sell it today you would lose (98.00) from holding Elis SA or give up 4.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Elis SA  vs.  Fnac Darty SA

Elis SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fnac Darty SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fnac Darty 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 Elis SA and Fnac Darty

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

The idea behind Elis SA and Fnac Darty 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.

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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.