Correlation Between Compagnie and Encres Dubuit

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

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

Diversification Opportunities for Compagnie and Encres Dubuit

0.8

Correlation Coefficient

Compagnie  Encres Dubuit

Very poor diversification

The 3 months correlation between Compagnie and Encres is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Chemins and Encres Dubuit SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encres Dubuit SA and Compagnie 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 Compagnie de Chemins are associated (or correlated) with Encres Dubuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encres Dubuit SA has no effect on the direction of Compagnie i.e., Compagnie and Encres Dubuit go up and down completely randomly.

Pair Corralation between Compagnie and Encres Dubuit

Assuming the 90 days trading horizon Compagnie is expected to generate 1.86 times less return on investment than Encres Dubuit. But when comparing it to its historical volatility, Compagnie de Chemins is 1.83 times less risky than Encres Dubuit. It trades about 0.16 of its potential returns per unit of risk. Encres Dubuit SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Encres Dubuit SA on September 24, 2024 and sell it today you would earn a total of  78.00  from holding Encres Dubuit SA or generate 38.24% return on investment over 90 days.

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

Compagnie de Chemins  vs.  Encres Dubuit SA

Compagnie de Chemins

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie reported solid returns over the last few months and may actually be approaching a breakup point.

Encres Dubuit SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Encres Dubuit SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Encres Dubuit reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Encres Dubuit

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

The idea behind Compagnie de Chemins and Encres Dubuit 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.