Correlation Between Verallia and Gascogne

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

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

Diversification Opportunities for Verallia and Gascogne

0.4

Correlation Coefficient

Verallia  Gascogne

Very weak diversification

The 3 months correlation between Verallia and Gascogne is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Verallia and Gascogne SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gascogne SA and Verallia 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 Verallia are associated (or correlated) with Gascogne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gascogne SA has no effect on the direction of Verallia i.e., Verallia and Gascogne go up and down completely randomly.

Pair Corralation between Verallia and Gascogne

Assuming the 90 days trading horizon Verallia is expected to under-perform the Gascogne. But the stock apears to be less risky and, when comparing its historical volatility, Verallia is 1.15 times less risky than Gascogne. The stock trades about -0.05 of its potential returns per unit of risk. The Gascogne SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  273.00  in Gascogne SA on September 14, 2024 and sell it today you would lose (18.00) from holding Gascogne SA or give up 6.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Verallia  vs.  Gascogne SA

Verallia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gascogne SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Verallia and Gascogne

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

The idea behind Verallia and Gascogne 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..