Correlation Between Van De and Fountain
Can any of the company-specific risk be diversified away by investing in both Van De and Fountain 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 Van De and Fountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Van de Velde and Fountain, you can compare the effects of market volatilities on Van De and Fountain 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 Van De with a short position of Fountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Van De and Fountain.
Diversification Opportunities for Van De and Fountain
Average diversification
The 3 months correlation between Van and Fountain is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Van de Velde and Fountain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountain and Van De 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 Van de Velde are associated (or correlated) with Fountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountain has no effect on the direction of Van De i.e., Van De and Fountain go up and down completely randomly.
Pair Corralation between Van De and Fountain
Assuming the 90 days trading horizon Van de Velde is expected to under-perform the Fountain. But the stock apears to be less risky and, when comparing its historical volatility, Van de Velde is 2.92 times less risky than Fountain. The stock trades about -0.07 of its potential returns per unit of risk. The Fountain is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 130.00 in Fountain on September 3, 2024 and sell it today you would earn a total of 7.00 from holding Fountain or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Van de Velde vs. Fountain
Performance |
| Timeline |
| Van de Velde |
| Fountain |
Van De and Fountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Van De and Fountain
The main advantage of trading using opposite Van De and Fountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Van De position performs unexpectedly, Fountain 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 Fountain will offset losses from the drop in Fountain's long position.| Van De vs. EVS Broadcast Equipment | Van De vs. NV Bekaert SA | Van De vs. Tessenderlo | Van De vs. Melexis 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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