Correlation Between Rexel SA and Edenred SA

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

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

Diversification Opportunities for Rexel SA and Edenred SA

-0.52

Correlation Coefficient

Rexel SA  Edenred SA

Excellent diversification

The 3 months correlation between Rexel and Edenred is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rexel SA and Edenred SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edenred SA and Rexel 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 Rexel SA are associated (or correlated) with Edenred SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edenred SA has no effect on the direction of Rexel SA i.e., Rexel SA and Edenred SA go up and down completely randomly.

Pair Corralation between Rexel SA and Edenred SA

Assuming the 90 days trading horizon Rexel SA is expected to generate 0.76 times more return on investment than Edenred SA. However, Rexel SA is 1.31 times less risky than Edenred SA. It trades about 0.07 of its potential returns per unit of risk. Edenred SA is currently generating about -0.08 per unit of risk. If you would invest  2,255  in Rexel SA on September 3, 2024 and sell it today you would earn a total of  189.00  from holding Rexel SA or generate 8.38% return on investment over 90 days.

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

Rexel SA  vs.  Edenred SA

Rexel SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rexel SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Rexel SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Edenred SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edenred 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.

Pair Trading with Rexel SA and Edenred SA

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

The idea behind Rexel SA and Edenred 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.