Correlation Between Renault SA and Socit Des

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

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

Diversification Opportunities for Renault SA and Socit Des

0.6

Correlation Coefficient

Renault SA  Socit Des

Poor diversification

The 3 months correlation between Renault and Socit is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Socit des Chemins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit des Chemins and Renault 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 Renault SA are associated (or correlated) with Socit Des. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit des Chemins has no effect on the direction of Renault SA i.e., Renault SA and Socit Des go up and down completely randomly.

Pair Corralation between Renault SA and Socit Des

If you would invest  4,829  in Renault SA on February 17, 2024 and sell it today you would earn a total of  191.00  from holding Renault SA or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Renault SA  vs.  Socit des Chemins

Renault SA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renault SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Socit des Chemins

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Socit des Chemins are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Socit Des is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Renault SA and Socit Des

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

The idea behind Renault SA and Socit des Chemins 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.