Correlation Between European Residential and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both European Residential and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Ltd, you can compare the effects of market volatilities on European Residential and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Canadian Utilities.
Diversification Opportunities for European Residential and Canadian Utilities
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and Canadian is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of European Residential i.e., European Residential and Canadian Utilities go up and down completely randomly.
Pair Corralation between European Residential and Canadian Utilities
Assuming the 90 days trading horizon European Residential Real is expected to generate 2.95 times more return on investment than Canadian Utilities. However, European Residential is 2.95 times more volatile than Canadian Utilities Ltd. It trades about 0.23 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about -0.14 per unit of risk. If you would invest 305.00 in European Residential Real on August 29, 2024 and sell it today you would earn a total of 58.00 from holding European Residential Real or generate 19.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Canadian Utilities Ltd
Performance |
| Timeline |
| European Residential Real |
| Canadian Utilities |
European Residential and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Canadian Utilities
The main advantage of trading using opposite European Residential and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' 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 |
| Canadian Utilities vs. Forstrong Global Income | Canadian Utilities vs. Terreno Resources Corp | Canadian Utilities vs. iShares Canadian HYBrid | Canadian Utilities vs. Brompton European Dividend |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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