Correlation Between BEKA LUX and Invesco Euro

Can any of the company-specific risk be diversified away by investing in both BEKA LUX and Invesco Euro 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 Invesco Euro 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 Invesco Euro Corporate, you can compare the effects of market volatilities on BEKA LUX and Invesco Euro 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 Invesco Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEKA LUX and Invesco Euro.

Diversification Opportunities for BEKA LUX and Invesco Euro

0.65

Correlation Coefficient

BEKA LUX  Invesco Euro

Poor diversification

The 3 months correlation between BEKA and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BEKA LUX SICAV and Invesco Euro Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Euro Corporate 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 Invesco Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Euro Corporate has no effect on the direction of BEKA LUX i.e., BEKA LUX and Invesco Euro go up and down completely randomly.

Pair Corralation between BEKA LUX and Invesco Euro

Assuming the 90 days trading horizon BEKA LUX is expected to generate 2.52 times less return on investment than Invesco Euro. In addition to that, BEKA LUX is 1.07 times more volatile than Invesco Euro Corporate. It trades about 0.04 of its total potential returns per unit of risk. Invesco Euro Corporate is currently generating about 0.1 per unit of volatility. If you would invest  1,862  in Invesco Euro Corporate on October 9, 2024 and sell it today you would earn a total of  14.00  from holding Invesco Euro Corporate or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

BEKA LUX SICAV  vs.  Invesco Euro Corporate

BEKA LUX SICAV

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days BEKA LUX SICAV has generated negative risk-adjusted returns adding no value to fund investors. 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.

Invesco Euro Corporate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Euro Corporate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Invesco Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BEKA LUX and Invesco Euro

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

The idea behind BEKA LUX SICAV and Invesco Euro Corporate 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.