Correlation Between Safran SA and Conrad Industries

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

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

Diversification Opportunities for Safran SA and Conrad Industries

-0.02

Correlation Coefficient

Safran SA  Conrad Industries

Good diversification

The 3 months correlation between Safran and Conrad is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Conrad Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conrad Industries and Safran 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 Safran SA are associated (or correlated) with Conrad Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conrad Industries has no effect on the direction of Safran SA i.e., Safran SA and Conrad Industries go up and down completely randomly.

Pair Corralation between Safran SA and Conrad Industries

Assuming the 90 days horizon Safran SA is expected to generate 0.49 times more return on investment than Conrad Industries. However, Safran SA is 2.03 times less risky than Conrad Industries. It trades about 0.08 of its potential returns per unit of risk. Conrad Industries is currently generating about -0.14 per unit of risk. If you would invest  3,666  in Safran SA on September 14, 2024 and sell it today you would earn a total of  1,854  from holding Safran SA or generate 50.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.69%
Values	Daily Returns

Safran SA  vs.  Conrad Industries

Safran SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safran SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Safran SA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Conrad Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conrad Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Conrad Industries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Safran SA and Conrad Industries

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

The idea behind Safran SA and Conrad Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.