Correlation Between European Residential and Covalon Technologies
Can any of the company-specific risk be diversified away by investing in both European Residential and Covalon Technologies 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 European Residential and Covalon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and Covalon Technologies, you can compare the effects of market volatilities on European Residential and Covalon Technologies 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 European Residential with a short position of Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Covalon Technologies.
Diversification Opportunities for European Residential and Covalon Technologies
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between European and Covalon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and European Residential 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 European Residential Real are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of European Residential i.e., European Residential and Covalon Technologies go up and down completely randomly.
Pair Corralation between European Residential and Covalon Technologies
Assuming the 90 days trading horizon European Residential Real is expected to generate 0.89 times more return on investment than Covalon Technologies. However, European Residential Real is 1.12 times less risky than Covalon Technologies. It trades about 0.29 of its potential returns per unit of risk. Covalon Technologies is currently generating about 0.1 per unit of risk. If you would invest 306.00 in European Residential Real on September 1, 2024 and sell it today you would earn a total of 74.00 from holding European Residential Real or generate 24.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Covalon Technologies
Performance |
| Timeline |
| European Residential Real |
| Covalon Technologies |
European Residential and Covalon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Covalon Technologies
The main advantage of trading using opposite European Residential and Covalon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Covalon Technologies 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 Covalon Technologies will offset losses from the drop in Covalon Technologies' long position.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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