Correlation Between Tetragon Financial and Eurocastle Investment
Can any of the company-specific risk be diversified away by investing in both Tetragon Financial and Eurocastle Investment 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 Tetragon Financial and Eurocastle Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetragon Financial Group and Eurocastle Investment, you can compare the effects of market volatilities on Tetragon Financial and Eurocastle Investment 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 Tetragon Financial with a short position of Eurocastle Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetragon Financial and Eurocastle Investment.
Diversification Opportunities for Tetragon Financial and Eurocastle Investment
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tetragon and Eurocastle is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group and Eurocastle Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocastle Investment and Tetragon Financial 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 Tetragon Financial Group are associated (or correlated) with Eurocastle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocastle Investment has no effect on the direction of Tetragon Financial i.e., Tetragon Financial and Eurocastle Investment go up and down completely randomly.
Pair Corralation between Tetragon Financial and Eurocastle Investment
Assuming the 90 days trading horizon Tetragon Financial Group is expected to generate 0.42 times more return on investment than Eurocastle Investment. However, Tetragon Financial Group is 2.4 times less risky than Eurocastle Investment. It trades about 0.23 of its potential returns per unit of risk. Eurocastle Investment is currently generating about -0.16 per unit of risk. If you would invest 1,410 in Tetragon Financial Group on November 5, 2024 and sell it today you would earn a total of 150.00 from holding Tetragon Financial Group or generate 10.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 42.86% |
| Values | Daily Returns |
Tetragon Financial Group vs. Eurocastle Investment
Performance |
| Timeline |
| Tetragon Financial |
| Eurocastle Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Tetragon Financial and Eurocastle Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tetragon Financial and Eurocastle Investment
The main advantage of trading using opposite Tetragon Financial and Eurocastle Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetragon Financial position performs unexpectedly, Eurocastle Investment 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 Eurocastle Investment will offset losses from the drop in Eurocastle Investment's long position.The idea behind Tetragon Financial Group and Eurocastle Investment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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