Correlation Between European Residential and Sienna Senior
Can any of the company-specific risk be diversified away by investing in both European Residential and Sienna Senior 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 Sienna Senior 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 Sienna Senior Living, you can compare the effects of market volatilities on European Residential and Sienna Senior 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 Sienna Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Sienna Senior.
Diversification Opportunities for European Residential and Sienna Senior
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between European and Sienna is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living 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 Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of European Residential i.e., European Residential and Sienna Senior go up and down completely randomly.
Pair Corralation between European Residential and Sienna Senior
Assuming the 90 days trading horizon European Residential Real is expected to generate 2.94 times more return on investment than Sienna Senior. However, European Residential is 2.94 times more volatile than Sienna Senior Living. It trades about 0.29 of its potential returns per unit of risk. Sienna Senior Living is currently generating about -0.04 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 | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
European Residential Real vs. Sienna Senior Living
Performance |
| Timeline |
| European Residential Real |
| Sienna Senior Living |
European Residential and Sienna Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Sienna Senior
The main advantage of trading using opposite European Residential and Sienna Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Sienna Senior 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 Sienna Senior will offset losses from the drop in Sienna Senior'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 |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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