Correlation Between Groupe Sfpi and Nhoa SA

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

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

Diversification Opportunities for Groupe Sfpi and Nhoa SA

0.61

Correlation Coefficient

Groupe Sfpi  Nhoa SA

Poor diversification

The 3 months correlation between Groupe and Nhoa is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Groupe Sfpi and Nhoa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nhoa SA and Groupe Sfpi 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 Groupe Sfpi are associated (or correlated) with Nhoa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nhoa SA has no effect on the direction of Groupe Sfpi i.e., Groupe Sfpi and Nhoa SA go up and down completely randomly.

Pair Corralation between Groupe Sfpi and Nhoa SA

Assuming the 90 days trading horizon Groupe Sfpi is expected to under-perform the Nhoa SA. But the stock apears to be less risky and, when comparing its historical volatility, Groupe Sfpi is 1.23 times less risky than Nhoa SA. The stock trades about -0.04 of its potential returns per unit of risk. The Nhoa SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Nhoa SA on September 5, 2024 and sell it today you would earn a total of  16.00  from holding Nhoa SA or generate 14.81% return on investment over 90 days.

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

Groupe Sfpi  vs.  Nhoa SA

Groupe Sfpi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nhoa SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nhoa SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nhoa SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Groupe Sfpi and Nhoa SA

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

The idea behind Groupe Sfpi and Nhoa 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.