Correlation Between Koninklijke BAM and Pharming Group
Can any of the company-specific risk be diversified away by investing in both Koninklijke BAM and Pharming Group 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 Koninklijke BAM and Pharming Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke BAM Groep and Pharming Group NV, you can compare the effects of market volatilities on Koninklijke BAM and Pharming Group 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 Koninklijke BAM with a short position of Pharming Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke BAM and Pharming Group.
Diversification Opportunities for Koninklijke BAM and Pharming Group
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Koninklijke and Pharming is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke BAM Groep and Pharming Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharming Group NV and Koninklijke BAM 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 Koninklijke BAM Groep are associated (or correlated) with Pharming Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharming Group NV has no effect on the direction of Koninklijke BAM i.e., Koninklijke BAM and Pharming Group go up and down completely randomly.
Pair Corralation between Koninklijke BAM and Pharming Group
Assuming the 90 days trading horizon Koninklijke BAM Groep is expected to generate 0.59 times more return on investment than Pharming Group. However, Koninklijke BAM Groep is 1.7 times less risky than Pharming Group. It trades about -0.31 of its potential returns per unit of risk. Pharming Group NV is currently generating about -0.19 per unit of risk. If you would invest 435.00 in Koninklijke BAM Groep on August 30, 2024 and sell it today you would lose (41.00) from holding Koninklijke BAM Groep or give up 9.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke BAM Groep vs. Pharming Group NV
Performance |
| Timeline |
| Koninklijke BAM Groep |
| Pharming Group NV |
Koninklijke BAM and Pharming Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke BAM and Pharming Group
The main advantage of trading using opposite Koninklijke BAM and Pharming Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke BAM position performs unexpectedly, Pharming Group 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 Pharming Group will offset losses from the drop in Pharming Group's long position.| Koninklijke BAM vs. Fugro NV | Koninklijke BAM vs. SBM Offshore NV | Koninklijke BAM vs. Aegon NV | Koninklijke BAM vs. PostNL NV |
| Pharming Group vs. Galapagos NV | Pharming Group vs. Koninklijke BAM Groep | Pharming Group vs. Fugro NV | Pharming Group vs. PostNL NV |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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