Correlation Between Randstad and Randstad Holdings

Can any of the company-specific risk be diversified away by investing in both Randstad and Randstad Holdings 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 Randstad and Randstad Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Randstad NV and Randstad Holdings NV, you can compare the effects of market volatilities on Randstad and Randstad Holdings 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 Randstad with a short position of Randstad Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Randstad and Randstad Holdings.

Diversification Opportunities for Randstad and Randstad Holdings

0.73

Correlation Coefficient

Randstad  Randstad Holdings

Poor diversification

The 3 months correlation between Randstad and Randstad is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Randstad NV and Randstad Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randstad Holdings and Randstad 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 Randstad NV are associated (or correlated) with Randstad Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randstad Holdings has no effect on the direction of Randstad i.e., Randstad and Randstad Holdings go up and down completely randomly.

Pair Corralation between Randstad and Randstad Holdings

Assuming the 90 days horizon Randstad NV is expected to generate 1.63 times more return on investment than Randstad Holdings. However, Randstad is 1.63 times more volatile than Randstad Holdings NV. It trades about 0.02 of its potential returns per unit of risk. Randstad Holdings NV is currently generating about 0.02 per unit of risk. If you would invest  4,687  in Randstad NV on February 12, 2024 and sell it today you would earn a total of  418.00  from holding Randstad NV or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.08%
Values	Daily Returns

Randstad NV  vs.  Randstad Holdings NV

Randstad NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Randstad NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Randstad Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Randstad Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Randstad Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Randstad and Randstad Holdings

The main advantage of trading using opposite Randstad and Randstad Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Randstad position performs unexpectedly, Randstad Holdings 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 Randstad Holdings will offset losses from the drop in Randstad Holdings' long position.

The idea behind Randstad NV and Randstad Holdings NV 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.