Correlation Between KAUFMAN ET and EDP Renovveis
Can any of the company-specific risk be diversified away by investing in both KAUFMAN ET and EDP Renovveis 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 KAUFMAN ET and EDP Renovveis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAUFMAN ET BROAD and EDP Renovveis SA, you can compare the effects of market volatilities on KAUFMAN ET and EDP Renovveis 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 KAUFMAN ET with a short position of EDP Renovveis. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAUFMAN ET and EDP Renovveis.
Diversification Opportunities for KAUFMAN ET and EDP Renovveis
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between KAUFMAN and EDP is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding KAUFMAN ET BROAD and EDP Renovveis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovveis SA and KAUFMAN ET 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 KAUFMAN ET BROAD are associated (or correlated) with EDP Renovveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovveis SA has no effect on the direction of KAUFMAN ET i.e., KAUFMAN ET and EDP Renovveis go up and down completely randomly.
Pair Corralation between KAUFMAN ET and EDP Renovveis
Assuming the 90 days trading horizon KAUFMAN ET BROAD is expected to generate 0.92 times more return on investment than EDP Renovveis. However, KAUFMAN ET BROAD is 1.08 times less risky than EDP Renovveis. It trades about 0.05 of its potential returns per unit of risk. EDP Renovveis SA is currently generating about -0.05 per unit of risk. If you would invest 2,216 in KAUFMAN ET BROAD on September 14, 2024 and sell it today you would earn a total of 914.00 from holding KAUFMAN ET BROAD or generate 41.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
KAUFMAN ET BROAD vs. EDP Renovveis SA
Performance |
| Timeline |
| KAUFMAN ET BROAD |
| EDP Renovveis SA |
KAUFMAN ET and EDP Renovveis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAUFMAN ET and EDP Renovveis
The main advantage of trading using opposite KAUFMAN ET and EDP Renovveis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAUFMAN ET position performs unexpectedly, EDP Renovveis 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 EDP Renovveis will offset losses from the drop in EDP Renovveis' long position.The idea behind KAUFMAN ET BROAD and EDP Renovveis 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.| EDP Renovveis vs. KAUFMAN ET BROAD | EDP Renovveis vs. Charter Communications | EDP Renovveis vs. Fukuyama Transporting Co | EDP Renovveis vs. BII Railway Transportation |
Check out your portfolio center.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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