Correlation Between Fountain and AGFA Gevaert
Can any of the company-specific risk be diversified away by investing in both Fountain and AGFA Gevaert 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 Fountain and AGFA Gevaert into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fountain and AGFA Gevaert NV, you can compare the effects of market volatilities on Fountain and AGFA Gevaert 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 Fountain with a short position of AGFA Gevaert. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fountain and AGFA Gevaert.
Diversification Opportunities for Fountain and AGFA Gevaert
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fountain and AGFA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fountain and AGFA Gevaert NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGFA Gevaert NV and Fountain 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 Fountain are associated (or correlated) with AGFA Gevaert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGFA Gevaert NV has no effect on the direction of Fountain i.e., Fountain and AGFA Gevaert go up and down completely randomly.
Pair Corralation between Fountain and AGFA Gevaert
Assuming the 90 days trading horizon Fountain is expected to generate 1.17 times more return on investment than AGFA Gevaert. However, Fountain is 1.17 times more volatile than AGFA Gevaert NV. It trades about 0.04 of its potential returns per unit of risk. AGFA Gevaert NV is currently generating about -0.1 per unit of risk. If you would invest 100.00 in Fountain on September 12, 2024 and sell it today you would earn a total of 25.00 from holding Fountain or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fountain vs. AGFA Gevaert NV
Performance |
| Timeline |
| Fountain |
| AGFA Gevaert NV |
Fountain and AGFA Gevaert Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fountain and AGFA Gevaert
The main advantage of trading using opposite Fountain and AGFA Gevaert positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fountain position performs unexpectedly, AGFA Gevaert 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 AGFA Gevaert will offset losses from the drop in AGFA Gevaert's long position.The idea behind Fountain and AGFA Gevaert NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| AGFA Gevaert vs. NV Bekaert SA | AGFA Gevaert vs. Barco NV | AGFA Gevaert vs. EVS Broadcast Equipment | AGFA Gevaert vs. Nyrstar 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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