Correlation Between Compagnie and ST Dupont

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

Diversification Opportunities for Compagnie and ST Dupont

0.64

Correlation Coefficient

Compagnie  ST Dupont

Poor diversification

The 3 months correlation between Compagnie and DPT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and ST Dupont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Dupont 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 ST Dupont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Dupont has no effect on the direction of Compagnie i.e., Compagnie and ST Dupont go up and down completely randomly.

Pair Corralation between Compagnie and ST Dupont

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.39 times more return on investment than ST Dupont. However, Compagnie de Saint Gobain is 2.54 times less risky than ST Dupont. It trades about 0.08 of its potential returns per unit of risk. ST Dupont is currently generating about -0.01 per unit of risk. If you would invest  4,974  in Compagnie de Saint Gobain on September 29, 2024 and sell it today you would earn a total of  3,646  from holding Compagnie de Saint Gobain or generate 73.3% 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.  ST Dupont

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.

ST Dupont

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Compagnie and ST Dupont

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

The idea behind Compagnie de Saint Gobain and ST Dupont 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.