Correlation Between European Residential and Solution Financial
Can any of the company-specific risk be diversified away by investing in both European Residential and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on European Residential and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Solution Financial.
Diversification Opportunities for European Residential and Solution Financial
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and Solution is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of European Residential i.e., European Residential and Solution Financial go up and down completely randomly.
Pair Corralation between European Residential and Solution Financial
Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Solution Financial. In addition to that, European Residential is 3.39 times more volatile than Solution Financial. It trades about -0.19 of its total potential returns per unit of risk. Solution Financial is currently generating about 0.08 per unit of volatility. If you would invest 27.00 in Solution Financial on October 13, 2024 and sell it today you would earn a total of 1.00 from holding Solution Financial or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Solution Financial
Performance |
| Timeline |
| European Residential Real |
| Solution Financial |
European Residential and Solution Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Solution Financial
The main advantage of trading using opposite European Residential and Solution Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Solution Financial 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 Solution Financial will offset losses from the drop in Solution Financial's long position.| European Residential vs. BSR Real Estate | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American | European Residential vs. Killam Apartment Real |
| Solution Financial vs. Ramp Metals | Solution Financial vs. Leveljump Healthcare Corp | Solution Financial vs. Nova Leap Health | Solution Financial vs. Champion Gaming Group |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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