Correlation Between London Stock and Euronext
Can any of the company-specific risk be diversified away by investing in both London Stock and Euronext 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 London Stock and Euronext into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Stock Exchange and Euronext NV, you can compare the effects of market volatilities on London Stock and Euronext 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 London Stock with a short position of Euronext. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Stock and Euronext.
Diversification Opportunities for London Stock and Euronext
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between London and Euronext is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Euronext NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronext NV and London Stock 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 London Stock Exchange are associated (or correlated) with Euronext. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronext NV has no effect on the direction of London Stock i.e., London Stock and Euronext go up and down completely randomly.
Pair Corralation between London Stock and Euronext
Assuming the 90 days trading horizon London Stock Exchange is expected to generate 1.58 times more return on investment than Euronext. However, London Stock is 1.58 times more volatile than Euronext NV. It trades about 0.09 of its potential returns per unit of risk. Euronext NV is currently generating about 0.13 per unit of risk. If you would invest 11,260 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 2,240 from holding London Stock Exchange or generate 19.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Stock Exchange vs. Euronext NV
Performance |
| Timeline |
| London Stock Exchange |
| Euronext NV |
London Stock and Euronext Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Stock and Euronext
The main advantage of trading using opposite London Stock and Euronext positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Stock position performs unexpectedly, Euronext 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 Euronext will offset losses from the drop in Euronext's long position.| London Stock vs. SMA Solar Technology | London Stock vs. Highlight Communications AG | London Stock vs. Ribbon Communications | London Stock vs. Singapore Telecommunications Limited |
| Euronext vs. CME Group | Euronext vs. Intercontinental Exchange | Euronext vs. Hong Kong Exchanges | Euronext vs. London Stock Exchange |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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