Correlation Between Compagnie and Amoeba SA

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

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

Diversification Opportunities for Compagnie and Amoeba SA

0.72

Correlation Coefficient

Compagnie  Amoeba SA

Poor diversification

The 3 months correlation between Compagnie and Amoeba is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Amoeba SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amoeba SA and Compagnie 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 Compagnie de Saint Gobain are associated (or correlated) with Amoeba SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amoeba SA has no effect on the direction of Compagnie i.e., Compagnie and Amoeba SA go up and down completely randomly.

Pair Corralation between Compagnie and Amoeba SA

Assuming the 90 days trading horizon Compagnie is expected to generate 13.27 times less return on investment than Amoeba SA. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 4.3 times less risky than Amoeba SA. It trades about 0.02 of its potential returns per unit of risk. Amoeba SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Amoeba SA on September 28, 2024 and sell it today you would earn a total of  5.00  from holding Amoeba SA or generate 6.02% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Amoeba SA

Compagnie de Saint

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amoeba SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amoeba SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Amoeba SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Amoeba SA

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

The idea behind Compagnie de Saint Gobain and Amoeba 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.