Correlation Between Compagnie and Fonciere Inea

Can any of the company-specific risk be diversified away by investing in both Compagnie and Fonciere Inea 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 Fonciere Inea 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 Fonciere Inea, you can compare the effects of market volatilities on Compagnie and Fonciere Inea 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 Fonciere Inea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Fonciere Inea.

Diversification Opportunities for Compagnie and Fonciere Inea

0.65

Correlation Coefficient

Compagnie  Fonciere Inea

Poor diversification

The 3 months correlation between Compagnie and Fonciere is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Chemins and Fonciere Inea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonciere Inea 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 Fonciere Inea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonciere Inea has no effect on the direction of Compagnie i.e., Compagnie and Fonciere Inea go up and down completely randomly.

Pair Corralation between Compagnie and Fonciere Inea

Assuming the 90 days trading horizon Compagnie de Chemins is expected to generate 2.82 times more return on investment than Fonciere Inea. However, Compagnie is 2.82 times more volatile than Fonciere Inea. It trades about 0.18 of its potential returns per unit of risk. Fonciere Inea is currently generating about 0.1 per unit of risk. If you would invest  72,000  in Compagnie de Chemins on September 3, 2024 and sell it today you would earn a total of  18,000  from holding Compagnie de Chemins or generate 25.0% return on investment over 90 days.

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

Compagnie de Chemins  vs.  Fonciere Inea

Compagnie de Chemins

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 14 (%) 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.

Fonciere Inea

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fonciere Inea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fonciere Inea is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compagnie and Fonciere Inea

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

The idea behind Compagnie de Chemins and Fonciere Inea 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.