Correlation Between Compagnie and Mercialys

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

Diversification Opportunities for Compagnie and Mercialys

-0.86

Correlation Coefficient

Compagnie  Mercialys

Pay attention - limited upside

The 3 months correlation between Compagnie and Mercialys is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Chemins and Mercialys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercialys 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 Mercialys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercialys SA has no effect on the direction of Compagnie i.e., Compagnie and Mercialys go up and down completely randomly.

Pair Corralation between Compagnie and Mercialys

Assuming the 90 days trading horizon Compagnie de Chemins is expected to generate 1.39 times more return on investment than Mercialys. However, Compagnie is 1.39 times more volatile than Mercialys SA. It trades about 0.18 of its potential returns per unit of risk. Mercialys SA is currently generating about -0.12 per unit of risk. If you would invest  72,000  in Compagnie de Chemins on September 1, 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Compagnie de Chemins  vs.  Mercialys SA

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.

Mercialys SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercialys SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Compagnie and Mercialys

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

The idea behind Compagnie de Chemins and Mercialys 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.