Correlation Between DEXUS and Covivio SA

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

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

Diversification Opportunities for DEXUS and Covivio SA

0.77

Correlation Coefficient

DEXUS  Covivio SA

Poor diversification

The 3 months correlation between DEXUS and Covivio is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding DEXUS and Covivio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio SA and DEXUS 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 DEXUS are associated (or correlated) with Covivio SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covivio SA has no effect on the direction of DEXUS i.e., DEXUS and Covivio SA go up and down completely randomly.

Pair Corralation between DEXUS and Covivio SA

Assuming the 90 days trading horizon DEXUS is expected to generate 1.02 times more return on investment than Covivio SA. However, DEXUS is 1.02 times more volatile than Covivio SA. It trades about 0.02 of its potential returns per unit of risk. Covivio SA is currently generating about -0.03 per unit of risk. If you would invest  418.00  in DEXUS on December 10, 2024 and sell it today you would earn a total of  9.00  from holding DEXUS or generate 2.15% return on investment over 90 days.

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

DEXUS  vs.  Covivio SA

DEXUS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DEXUS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DEXUS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Covivio SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covivio SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Covivio SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DEXUS and Covivio SA

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

The idea behind DEXUS and Covivio 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.