Correlation Between Compagnie and FreelanceCom

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

By analyzing existing cross correlation between Compagnie du Cambodge and FreelanceCom, you can compare the effects of market volatilities on Compagnie and FreelanceCom 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 FreelanceCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and FreelanceCom.

Diversification Opportunities for Compagnie and FreelanceCom

0.72

Correlation Coefficient

Compagnie  FreelanceCom

Poor diversification

The 3 months correlation between Compagnie and FreelanceCom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie du Cambodge and FreelanceCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FreelanceCom 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 du Cambodge are associated (or correlated) with FreelanceCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FreelanceCom has no effect on the direction of Compagnie i.e., Compagnie and FreelanceCom go up and down completely randomly.

Pair Corralation between Compagnie and FreelanceCom

Assuming the 90 days trading horizon Compagnie du Cambodge is expected to generate 0.66 times more return on investment than FreelanceCom. However, Compagnie du Cambodge is 1.53 times less risky than FreelanceCom. It trades about 0.03 of its potential returns per unit of risk. FreelanceCom is currently generating about -0.05 per unit of risk. If you would invest  572,448  in Compagnie du Cambodge on February 8, 2024 and sell it today you would earn a total of  107,552  from holding Compagnie du Cambodge or generate 18.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.88%
Values	Daily Returns

Compagnie du Cambodge  vs.  FreelanceCom

Compagnie du Cambodge

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie du Cambodge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FreelanceCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FreelanceCom has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Compagnie and FreelanceCom

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

The idea behind Compagnie du Cambodge and FreelanceCom 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.