Correlation Between European Residential and Highland Copper
Can any of the company-specific risk be diversified away by investing in both European Residential and Highland Copper 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 Highland Copper 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 Highland Copper, you can compare the effects of market volatilities on European Residential and Highland Copper 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 Highland Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Highland Copper.
Diversification Opportunities for European Residential and Highland Copper
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between European and Highland is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper 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 Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of European Residential i.e., European Residential and Highland Copper go up and down completely randomly.
Pair Corralation between European Residential and Highland Copper
Assuming the 90 days trading horizon European Residential is expected to generate 1.69 times less return on investment than Highland Copper. But when comparing it to its historical volatility, European Residential Real is 3.42 times less risky than Highland Copper. It trades about 0.1 of its potential returns per unit of risk. Highland Copper is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Highland Copper on September 4, 2024 and sell it today you would earn a total of 3.00 from holding Highland Copper or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.66% |
| Values | Daily Returns |
European Residential Real vs. Highland Copper
Performance |
| Timeline |
| European Residential Real |
| Highland Copper |
European Residential and Highland Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Highland Copper
The main advantage of trading using opposite European Residential and Highland Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Highland Copper 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 Highland Copper will offset losses from the drop in Highland Copper's 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 |
| Highland Copper vs. Themac Resources Group | Highland Copper vs. Gunpoint Exploration | Highland Copper vs. Golden Pursuit Resources | Highland Copper vs. Goldbank Mining Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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