Correlation Between Compagnie and Travis Perkins

Can any of the company-specific risk be diversified away by investing in both Compagnie 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 Compagnie and Travis Perkins 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 Travis Perkins PLC, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of Travis Perkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Travis Perkins.

Diversification Opportunities for Compagnie and Travis Perkins

0.93

Correlation Coefficient

Compagnie  Travis Perkins

Almost no diversification

The 3 months correlation between Compagnie and Travis is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain 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 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 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 Compagnie i.e., Compagnie and Travis Perkins go up and down completely randomly.

Pair Corralation between Compagnie and Travis Perkins

Assuming the 90 days horizon Compagnie de Saint Gobain is expected to under-perform the Travis Perkins. In addition to that, Compagnie is 1.22 times more volatile than Travis Perkins PLC. It trades about -0.14 of its total potential returns per unit of risk. Travis Perkins PLC is currently generating about 0.31 per unit of volatility. If you would invest  992.00  in Travis Perkins PLC on March 13, 2024 and sell it today you would earn a total of  90.00  from holding Travis Perkins PLC or generate 9.07% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Travis Perkins PLC

Compagnie de Saint

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Travis Perkins PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Travis Perkins PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, Travis Perkins showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Travis Perkins

The main advantage of trading using opposite Compagnie and Travis Perkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.