Correlation Between Compagnie and Itissalat

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

Diversification Opportunities for Compagnie and Itissalat

-0.31

Correlation Coefficient

Compagnie  Itissalat

Very good diversification

The 3 months correlation between Compagnie and Itissalat is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Itissalat Al Maghrib in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itissalat Al Maghrib 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 Itissalat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itissalat Al Maghrib has no effect on the direction of Compagnie i.e., Compagnie and Itissalat go up and down completely randomly.

Pair Corralation between Compagnie and Itissalat

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 1.27 times more return on investment than Itissalat. However, Compagnie is 1.27 times more volatile than Itissalat Al Maghrib. It trades about 0.01 of its potential returns per unit of risk. Itissalat Al Maghrib is currently generating about -0.07 per unit of risk. If you would invest  8,910  in Compagnie de Saint Gobain on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Compagnie de Saint Gobain or generate 0.09% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Itissalat Al Maghrib

Compagnie de Saint

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Itissalat Al Maghrib

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Compagnie and Itissalat

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

The idea behind Compagnie de Saint Gobain and Itissalat Al Maghrib 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 Transaction History module to view history of all your transactions and understand their impact on performance.