Correlation Between ForFarmers and Koninklijke BAM
Can any of the company-specific risk be diversified away by investing in both ForFarmers and Koninklijke BAM 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 ForFarmers and Koninklijke BAM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ForFarmers NV and Koninklijke BAM Groep, you can compare the effects of market volatilities on ForFarmers and Koninklijke BAM 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 ForFarmers with a short position of Koninklijke BAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of ForFarmers and Koninklijke BAM.
Diversification Opportunities for ForFarmers and Koninklijke BAM
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ForFarmers and Koninklijke is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ForFarmers NV and Koninklijke BAM Groep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke BAM Groep and ForFarmers 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 ForFarmers NV are associated (or correlated) with Koninklijke BAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke BAM Groep has no effect on the direction of ForFarmers i.e., ForFarmers and Koninklijke BAM go up and down completely randomly.
Pair Corralation between ForFarmers and Koninklijke BAM
Assuming the 90 days trading horizon ForFarmers NV is expected to generate 1.11 times more return on investment than Koninklijke BAM. However, ForFarmers is 1.11 times more volatile than Koninklijke BAM Groep. It trades about -0.1 of its potential returns per unit of risk. Koninklijke BAM Groep is currently generating about -0.31 per unit of risk. If you would invest 333.00 in ForFarmers NV on August 31, 2024 and sell it today you would lose (12.00) from holding ForFarmers NV or give up 3.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ForFarmers NV vs. Koninklijke BAM Groep
Performance |
| Timeline |
| ForFarmers NV |
| Koninklijke BAM Groep |
ForFarmers and Koninklijke BAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ForFarmers and Koninklijke BAM
The main advantage of trading using opposite ForFarmers and Koninklijke BAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ForFarmers position performs unexpectedly, Koninklijke BAM 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 Koninklijke BAM will offset losses from the drop in Koninklijke BAM's long position.| ForFarmers vs. Koninklijke Heijmans NV | ForFarmers vs. Amsterdam Commodities NV | ForFarmers vs. Flow Traders BV | ForFarmers vs. Koninklijke BAM Groep |
| Koninklijke BAM vs. Fugro NV | Koninklijke BAM vs. SBM Offshore NV | Koninklijke BAM vs. Aegon NV | Koninklijke BAM vs. PostNL NV |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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