Correlation Between SCOR SE and Coface SA

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

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

Diversification Opportunities for SCOR SE and Coface SA

0.27

Correlation Coefficient

SCOR SE  Coface SA

Modest diversification

The 3 months correlation between SCOR and Coface is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SCOR SE and Coface SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coface SA and SCOR SE 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 SCOR SE are associated (or correlated) with Coface SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coface SA has no effect on the direction of SCOR SE i.e., SCOR SE and Coface SA go up and down completely randomly.

Pair Corralation between SCOR SE and Coface SA

Assuming the 90 days trading horizon SCOR SE is expected to generate 1.41 times less return on investment than Coface SA. In addition to that, SCOR SE is 1.63 times more volatile than Coface SA. It trades about 0.02 of its total potential returns per unit of risk. Coface SA is currently generating about 0.05 per unit of volatility. If you would invest  1,052  in Coface SA on August 31, 2024 and sell it today you would earn a total of  412.00  from holding Coface SA or generate 39.16% return on investment over 90 days.

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

SCOR SE  vs.  Coface SA

SCOR SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SCOR SE sustained solid returns over the last few months and may actually be approaching a breakup point.

Coface SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SCOR SE and Coface SA

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

The idea behind SCOR SE and Coface 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.