Correlation Between Vinci SA and Travis Perkins

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

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

Diversification Opportunities for Vinci SA and Travis Perkins

0.83

Correlation Coefficient

Vinci SA  Travis Perkins

Very poor diversification

The 3 months correlation between Vinci and Travis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vinci SA ADR and Travis Perkins PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travis Perkins PLC and Vinci SA 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 Vinci SA ADR are associated (or correlated) with Travis Perkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travis Perkins PLC has no effect on the direction of Vinci SA i.e., Vinci SA and Travis Perkins go up and down completely randomly.

Pair Corralation between Vinci SA and Travis Perkins

Assuming the 90 days horizon Vinci SA ADR is expected to under-perform the Travis Perkins. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vinci SA ADR is 1.75 times less risky than Travis Perkins. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Travis Perkins PLC is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,162  in Travis Perkins PLC on September 5, 2024 and sell it today you would lose (178.00) from holding Travis Perkins PLC or give up 15.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vinci SA ADR  vs.  Travis Perkins PLC

Vinci SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Travis Perkins PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Travis Perkins PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vinci SA and Travis Perkins

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

The idea behind Vinci SA ADR and Travis Perkins PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.