Correlation Between BEKA LUX and Nova Europe

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

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

Diversification Opportunities for BEKA LUX and Nova Europe

-0.25

Correlation Coefficient

BEKA LUX  Nova Europe

Very good diversification

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

Pair Corralation between BEKA LUX and Nova Europe

Assuming the 90 days trading horizon BEKA LUX SICAV is expected to under-perform the Nova Europe. But the fund apears to be less risky and, when comparing its historical volatility, BEKA LUX SICAV is 2.91 times less risky than Nova Europe. The fund trades about -0.36 of its potential returns per unit of risk. The Nova Europe ISR is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  21,203  in Nova Europe ISR on September 23, 2024 and sell it today you would lose (285.00) from holding Nova Europe ISR or give up 1.34% of portfolio value over 90 days.

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

BEKA LUX SICAV  vs.  Nova Europe ISR

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.

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.

Pair Trading with BEKA LUX and Nova Europe

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

The idea behind BEKA LUX SICAV and Nova Europe ISR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.