Correlation Between Compagnie and Prodways Group

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

Diversification Opportunities for Compagnie and Prodways Group

-0.68

Correlation Coefficient

Compagnie  Prodways Group

Excellent diversification

The 3 months correlation between Compagnie and Prodways is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Prodways Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodways Group 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 Prodways Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodways Group SA has no effect on the direction of Compagnie i.e., Compagnie and Prodways Group go up and down completely randomly.

Pair Corralation between Compagnie and Prodways Group

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.42 times more return on investment than Prodways Group. However, Compagnie de Saint Gobain is 2.36 times less risky than Prodways Group. It trades about 0.18 of its potential returns per unit of risk. Prodways Group SA is currently generating about -0.04 per unit of risk. If you would invest  7,686  in Compagnie de Saint Gobain on September 11, 2024 and sell it today you would earn a total of  1,302  from holding Compagnie de Saint Gobain or generate 16.94% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Prodways Group SA

Compagnie de Saint

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 14 (%) 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.

Prodways Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prodways Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compagnie and Prodways Group

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

The idea behind Compagnie de Saint Gobain and Prodways Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.