Correlation Between Stellantis and Renault SA

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

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

Diversification Opportunities for Stellantis and Renault SA

0.25

Correlation Coefficient

Stellantis  Renault SA

Modest diversification

The 3 months correlation between Stellantis and Renault is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Stellantis NV and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA and Stellantis 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 Stellantis NV are associated (or correlated) with Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Stellantis i.e., Stellantis and Renault SA go up and down completely randomly.

Pair Corralation between Stellantis and Renault SA

Given the investment horizon of 90 days Stellantis NV is expected to under-perform the Renault SA. In addition to that, Stellantis is 1.34 times more volatile than Renault SA. It trades about -0.04 of its total potential returns per unit of risk. Renault SA is currently generating about 0.07 per unit of volatility. If you would invest  863.00  in Renault SA on September 16, 2024 and sell it today you would earn a total of  68.00  from holding Renault SA or generate 7.88% return on investment over 90 days.

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

Stellantis NV  vs.  Renault SA

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Renault SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Renault SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stellantis and Renault SA

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

The idea behind Stellantis NV and Renault 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.