Correlation Between Renault SA and Smcp SAS
Can any of the company-specific risk be diversified away by investing in both Renault SA and Smcp SAS 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 Renault SA and Smcp SAS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renault SA and Smcp SAS, you can compare the effects of market volatilities on Renault SA and Smcp SAS 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 Renault SA with a short position of Smcp SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renault SA and Smcp SAS.
Diversification Opportunities for Renault SA and Smcp SAS
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Renault and Smcp is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Smcp SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smcp SAS and Renault 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 Renault SA are associated (or correlated) with Smcp SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smcp SAS has no effect on the direction of Renault SA i.e., Renault SA and Smcp SAS go up and down completely randomly.
Pair Corralation between Renault SA and Smcp SAS
Assuming the 90 days trading horizon Renault SA is expected to generate 2.16 times less return on investment than Smcp SAS. But when comparing it to its historical volatility, Renault SA is 1.73 times less risky than Smcp SAS. It trades about 0.14 of its potential returns per unit of risk. Smcp SAS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 247.00 in Smcp SAS on September 26, 2024 and sell it today you would earn a total of 102.00 from holding Smcp SAS or generate 41.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Renault SA vs. Smcp SAS
Performance |
Timeline |
Renault SA |
Smcp SAS |
Renault SA and Smcp SAS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Renault SA and Smcp SAS
The main advantage of trading using opposite Renault SA and Smcp SAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renault SA position performs unexpectedly, Smcp SAS 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 Smcp SAS will offset losses from the drop in Smcp SAS's long position.Renault SA vs. Carrefour SA | Renault SA vs. BNP Paribas SA | Renault SA vs. Societe Generale SA | Renault SA vs. Credit Agricole SA |
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Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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