Correlation Between Compagnie Generale and DENSO

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

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

Diversification Opportunities for Compagnie Generale and DENSO

0.91

Correlation Coefficient

Compagnie Generale  DENSO

Almost no diversification

The 3 months correlation between Compagnie and DENSO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Generale des and DENSO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO and Compagnie Generale 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 Generale des are associated (or correlated) with DENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO has no effect on the direction of Compagnie Generale i.e., Compagnie Generale and DENSO go up and down completely randomly.

Pair Corralation between Compagnie Generale and DENSO

Assuming the 90 days horizon Compagnie Generale is expected to generate 156.3 times less return on investment than DENSO. But when comparing it to its historical volatility, Compagnie Generale des is 77.33 times less risky than DENSO. It trades about 0.07 of its potential returns per unit of risk. DENSO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,312  in DENSO on January 17, 2024 and sell it today you would earn a total of  596.00  from holding DENSO or generate 45.43% return on investment over 90 days.

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

Compagnie Generale des  vs.  DENSO

Compagnie Generale des

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Generale des are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Compagnie Generale may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DENSO

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, DENSO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Generale and DENSO

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

The idea behind Compagnie Generale des and DENSO 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.