Correlation Between Snap and Europlasma
Can any of the company-specific risk be diversified away by investing in both Snap and Europlasma 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 Snap and Europlasma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Europlasma SA, you can compare the effects of market volatilities on Snap and Europlasma 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 Snap with a short position of Europlasma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Europlasma.
Diversification Opportunities for Snap and Europlasma
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Snap and Europlasma is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Europlasma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europlasma SA and Snap 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 Snap Inc are associated (or correlated) with Europlasma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europlasma SA has no effect on the direction of Snap i.e., Snap and Europlasma go up and down completely randomly.
Pair Corralation between Snap and Europlasma
Given the investment horizon of 90 days Snap is expected to generate 2.26 times less return on investment than Europlasma. But when comparing it to its historical volatility, Snap Inc is 4.8 times less risky than Europlasma. It trades about 0.08 of its potential returns per unit of risk. Europlasma SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7.09 in Europlasma SA on August 30, 2024 and sell it today you would lose (0.94) from holding Europlasma SA or give up 13.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Europlasma SA
Performance |
| Timeline |
| Snap Inc |
| Europlasma SA |
Snap and Europlasma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Europlasma
The main advantage of trading using opposite Snap and Europlasma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Europlasma 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 Europlasma will offset losses from the drop in Europlasma's long position.The idea behind Snap Inc and Europlasma SA 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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