Correlation Between European Residential and Wescan Goldfields
Can any of the company-specific risk be diversified away by investing in both European Residential and Wescan Goldfields 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 Wescan Goldfields 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 Wescan Goldfields, you can compare the effects of market volatilities on European Residential and Wescan Goldfields 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 Wescan Goldfields. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Wescan Goldfields.
Diversification Opportunities for European Residential and Wescan Goldfields
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and Wescan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Wescan Goldfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wescan Goldfields 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 Wescan Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wescan Goldfields has no effect on the direction of European Residential i.e., European Residential and Wescan Goldfields go up and down completely randomly.
Pair Corralation between European Residential and Wescan Goldfields
Assuming the 90 days trading horizon European Residential Real is expected to generate 0.5 times more return on investment than Wescan Goldfields. However, European Residential Real is 1.99 times less risky than Wescan Goldfields. It trades about 0.24 of its potential returns per unit of risk. Wescan Goldfields is currently generating about -0.22 per unit of risk. If you would invest 312.00 in European Residential Real on September 4, 2024 and sell it today you would earn a total of 62.00 from holding European Residential Real or generate 19.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
European Residential Real vs. Wescan Goldfields
Performance |
| Timeline |
| European Residential Real |
| Wescan Goldfields |
European Residential and Wescan Goldfields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Wescan Goldfields
The main advantage of trading using opposite European Residential and Wescan Goldfields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Wescan Goldfields 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 Wescan Goldfields will offset losses from the drop in Wescan Goldfields' 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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