Correlation Between Seche Environnem and Air France

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

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

Diversification Opportunities for Seche Environnem and Air France

0.31

Correlation Coefficient

Seche Environnem  Air France

Weak diversification

The 3 months correlation between Seche and Air is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnem and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Seche Environnem 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 Seche Environnem are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Seche Environnem i.e., Seche Environnem and Air France go up and down completely randomly.

Pair Corralation between Seche Environnem and Air France

Assuming the 90 days trading horizon Seche Environnem is expected to under-perform the Air France. But the stock apears to be less risky and, when comparing its historical volatility, Seche Environnem is 1.6 times less risky than Air France. The stock trades about -0.13 of its potential returns per unit of risk. The Air France KLM SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  821.00  in Air France KLM SA on September 3, 2024 and sell it today you would lose (82.00) from holding Air France KLM SA or give up 9.99% of portfolio value over 90 days.

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

Seche Environnem  vs.  Air France KLM SA

Seche Environnem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA 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.

Pair Trading with Seche Environnem and Air France

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

The idea behind Seche Environnem and Air France KLM 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.