Correlation Between Nova Europe and BEKA LUX

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

By analyzing existing cross correlation between Nova Europe ISR and BEKA LUX SICAV, you can compare the effects of market volatilities on Nova Europe and BEKA LUX 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 Nova Europe with a short position of BEKA LUX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Europe and BEKA LUX.

Diversification Opportunities for Nova Europe and BEKA LUX

-0.25

Correlation Coefficient

Nova Europe  BEKA LUX

Very good diversification

The 3 months correlation between Nova and BEKA is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nova Europe ISR and BEKA LUX SICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEKA LUX SICAV and Nova Europe 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 Nova Europe ISR are associated (or correlated) with BEKA LUX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEKA LUX SICAV has no effect on the direction of Nova Europe i.e., Nova Europe and BEKA LUX go up and down completely randomly.

Pair Corralation between Nova Europe and BEKA LUX

Assuming the 90 days trading horizon Nova Europe ISR is expected to under-perform the BEKA LUX. In addition to that, Nova Europe is 2.5 times more volatile than BEKA LUX SICAV. It trades about -0.23 of its total potential returns per unit of risk. BEKA LUX SICAV is currently generating about -0.05 per unit of volatility. If you would invest  8,723  in BEKA LUX SICAV on September 23, 2024 and sell it today you would lose (43.00) from holding BEKA LUX SICAV or give up 0.49% of portfolio value over 90 days.

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

Nova Europe ISR  vs.  BEKA LUX SICAV

Nova Europe ISR

Risk-Adjusted Performance

0 of 100

Very Weak

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

BEKA LUX SICAV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BEKA LUX SICAV are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, BEKA LUX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nova Europe and BEKA LUX

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

The idea behind Nova Europe ISR and BEKA LUX SICAV 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.