Correlation Between Rexel SA and Tarkett SA

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

Diversification Opportunities for Rexel SA and Tarkett SA

0.5

Correlation Coefficient

Rexel SA  Tarkett SA

Very weak diversification

The 3 months correlation between Rexel and Tarkett is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Rexel SA and Tarkett SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarkett 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 Tarkett SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarkett SA has no effect on the direction of Rexel SA i.e., Rexel SA and Tarkett SA go up and down completely randomly.

Pair Corralation between Rexel SA and Tarkett SA

Assuming the 90 days trading horizon Rexel SA is expected to generate 2.53 times less return on investment than Tarkett SA. But when comparing it to its historical volatility, Rexel SA is 1.03 times less risky than Tarkett SA. It trades about 0.05 of its potential returns per unit of risk. Tarkett SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Tarkett SA on August 31, 2024 and sell it today you would earn a total of  160.00  from holding Tarkett SA or generate 17.98% return on investment over 90 days.

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

Rexel SA  vs.  Tarkett SA

Rexel SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rexel SA are ranked lower than 4 (%) 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 December 2024.

Tarkett SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tarkett SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tarkett SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rexel SA and Tarkett SA

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

The idea behind Rexel SA and Tarkett 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.