Correlation Between High Co and Derichebourg

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

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

Diversification Opportunities for High Co and Derichebourg

0.5

Correlation Coefficient

High Co  Derichebourg

Very weak diversification

The 3 months correlation between High and Derichebourg is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding High Co SA and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg and High Co 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 High Co SA are associated (or correlated) with Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of High Co i.e., High Co and Derichebourg go up and down completely randomly.

Pair Corralation between High Co and Derichebourg

Assuming the 90 days trading horizon High Co SA is expected to generate 0.54 times more return on investment than Derichebourg. However, High Co SA is 1.86 times less risky than Derichebourg. It trades about -0.04 of its potential returns per unit of risk. Derichebourg is currently generating about -0.07 per unit of risk. If you would invest  259.00  in High Co SA on August 31, 2024 and sell it today you would lose (9.00) from holding High Co SA or give up 3.47% of portfolio value over 90 days.

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

High Co SA  vs.  Derichebourg

High Co SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest weak performance, the Stock's technical and fundamental 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 High Co and Derichebourg

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

The idea behind High Co SA and Derichebourg 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.