Correlation Between Mersen SA and Fnac Darty

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

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

Diversification Opportunities for Mersen SA and Fnac Darty

0.51

Correlation Coefficient

Mersen SA  Fnac Darty

Very weak diversification

The 3 months correlation between Mersen and Fnac is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mersen SA and Fnac Darty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fnac Darty SA and Mersen SA 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 Mersen SA are associated (or correlated) with Fnac Darty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fnac Darty SA has no effect on the direction of Mersen SA i.e., Mersen SA and Fnac Darty go up and down completely randomly.

Pair Corralation between Mersen SA and Fnac Darty

Assuming the 90 days trading horizon Mersen SA is expected to under-perform the Fnac Darty. In addition to that, Mersen SA is 1.3 times more volatile than Fnac Darty SA. It trades about -0.18 of its total potential returns per unit of risk. Fnac Darty SA is currently generating about -0.05 per unit of volatility. If you would invest  3,045  in Fnac Darty SA on September 26, 2024 and sell it today you would lose (245.00) from holding Fnac Darty SA or give up 8.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Mersen SA  vs.  Fnac Darty SA

Mersen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mersen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fnac Darty SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fnac Darty 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 Mersen SA and Fnac Darty

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

The idea behind Mersen SA and Fnac Darty 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.