Correlation Between Frey SA and Fonciere Lyonnaise

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

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

Diversification Opportunities for Frey SA and Fonciere Lyonnaise

-0.09

Correlation Coefficient

Frey SA  Fonciere Lyonnaise

Good diversification

The 3 months correlation between Frey and Fonciere is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Frey SA and Fonciere Lyonnaise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonciere Lyonnaise and Frey 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 Frey SA are associated (or correlated) with Fonciere Lyonnaise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonciere Lyonnaise has no effect on the direction of Frey SA i.e., Frey SA and Fonciere Lyonnaise go up and down completely randomly.

Pair Corralation between Frey SA and Fonciere Lyonnaise

Assuming the 90 days trading horizon Frey SA is expected to under-perform the Fonciere Lyonnaise. But the stock apears to be less risky and, when comparing its historical volatility, Frey SA is 1.85 times less risky than Fonciere Lyonnaise. The stock trades about -0.04 of its potential returns per unit of risk. The Fonciere Lyonnaise is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,580  in Fonciere Lyonnaise on September 13, 2024 and sell it today you would earn a total of  720.00  from holding Fonciere Lyonnaise or generate 10.94% return on investment over 90 days.

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

Frey SA  vs.  Fonciere Lyonnaise

Frey SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fonciere Lyonnaise

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fonciere Lyonnaise are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fonciere Lyonnaise may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frey SA and Fonciere Lyonnaise

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

The idea behind Frey SA and Fonciere Lyonnaise 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.