Correlation Between Prodways Group and Neolife SA
Can any of the company-specific risk be diversified away by investing in both Prodways Group and Neolife SA 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 Prodways Group and Neolife SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prodways Group SA and Neolife SA, you can compare the effects of market volatilities on Prodways Group and Neolife SA 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 Prodways Group with a short position of Neolife SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prodways Group and Neolife SA.
Diversification Opportunities for Prodways Group and Neolife SA
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Prodways and Neolife is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prodways Group SA and Neolife SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neolife SA and Prodways Group 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 Prodways Group SA are associated (or correlated) with Neolife SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neolife SA has no effect on the direction of Prodways Group i.e., Prodways Group and Neolife SA go up and down completely randomly.
Pair Corralation between Prodways Group and Neolife SA
Assuming the 90 days trading horizon Prodways Group SA is expected to under-perform the Neolife SA. But the stock apears to be less risky and, when comparing its historical volatility, Prodways Group SA is 2.45 times less risky than Neolife SA. The stock trades about -0.18 of its potential returns per unit of risk. The Neolife SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 5.84 in Neolife SA on August 29, 2024 and sell it today you would lose (0.13) from holding Neolife SA or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prodways Group SA vs. Neolife SA
Performance |
| Timeline |
| Prodways Group SA |
| Neolife SA |
Prodways Group and Neolife SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prodways Group and Neolife SA
The main advantage of trading using opposite Prodways Group and Neolife SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prodways Group position performs unexpectedly, Neolife SA 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 Neolife SA will offset losses from the drop in Neolife SA's long position.| Prodways Group vs. Balyo SA | Prodways Group vs. Lumibird SA | Prodways Group vs. Chargeurs SA | Prodways Group vs. Figeac Aero SA |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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