Correlation Between European Residential and Gitennes Exploration

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

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

Diversification Opportunities for European Residential and Gitennes Exploration

0.14

Correlation Coefficient

European Residential  Gitennes Exploration

Average diversification

The 3 months correlation between European and Gitennes is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Gitennes Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gitennes Exploration and European Residential 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 European Residential Real are associated (or correlated) with Gitennes Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gitennes Exploration has no effect on the direction of European Residential i.e., European Residential and Gitennes Exploration go up and down completely randomly.

Pair Corralation between European Residential and Gitennes Exploration

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Gitennes Exploration. But the stock apears to be less risky and, when comparing its historical volatility, European Residential Real is 27.89 times less risky than Gitennes Exploration. The stock trades about 0.0 of its potential returns per unit of risk. The Gitennes Exploration is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Gitennes Exploration on April 2, 2024 and sell it today you would earn a total of  0.00  from holding Gitennes Exploration or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

European Residential Real  vs.  Gitennes Exploration

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, European Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gitennes Exploration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gitennes Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Gitennes Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Residential and Gitennes Exploration

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

The idea behind European Residential Real and Gitennes Exploration 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 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.