Correlation Between Nexans SA and Hubbell

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

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

Diversification Opportunities for Nexans SA and Hubbell

-0.42

Correlation Coefficient

Nexans SA  Hubbell

Very good diversification

The 3 months correlation between Nexans and Hubbell is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nexans SA and Hubbell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubbell and Nexans 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 Nexans SA are associated (or correlated) with Hubbell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubbell has no effect on the direction of Nexans SA i.e., Nexans SA and Hubbell go up and down completely randomly.

Pair Corralation between Nexans SA and Hubbell

Assuming the 90 days horizon Nexans SA is expected to under-perform the Hubbell. In addition to that, Nexans SA is 1.2 times more volatile than Hubbell. It trades about -0.16 of its total potential returns per unit of risk. Hubbell is currently generating about 0.01 per unit of volatility. If you would invest  42,536  in Hubbell on September 23, 2024 and sell it today you would earn a total of  144.00  from holding Hubbell or generate 0.34% return on investment over 90 days.

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

Nexans SA  vs.  Hubbell

Nexans SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hubbell

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nexans SA and Hubbell

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

The idea behind Nexans SA and Hubbell 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.