Correlation Between IDI SCA and Wendel

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

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

Diversification Opportunities for IDI SCA and Wendel

-0.04

Correlation Coefficient

IDI SCA  Wendel

Good diversification

The 3 months correlation between IDI and Wendel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding IDI SCA and Wendel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wendel and IDI SCA 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 IDI SCA are associated (or correlated) with Wendel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wendel has no effect on the direction of IDI SCA i.e., IDI SCA and Wendel go up and down completely randomly.

Pair Corralation between IDI SCA and Wendel

Assuming the 90 days trading horizon IDI SCA is expected to under-perform the Wendel. But the stock apears to be less risky and, when comparing its historical volatility, IDI SCA is 1.1 times less risky than Wendel. The stock trades about -0.01 of its potential returns per unit of risk. The Wendel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,030  in Wendel on September 3, 2024 and sell it today you would earn a total of  365.00  from holding Wendel or generate 4.04% return on investment over 90 days.

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

IDI SCA  vs.  Wendel

IDI SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wendel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wendel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wendel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IDI SCA and Wendel

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

The idea behind IDI SCA and Wendel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.