Correlation Between AGFA Gevaert and Campine

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

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

Diversification Opportunities for AGFA Gevaert and Campine

0.5

Correlation Coefficient

AGFA Gevaert  Campine

Very weak diversification

The 3 months correlation between AGFA and Campine is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AGFA Gevaert NV and Campine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campine and AGFA Gevaert 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 AGFA Gevaert NV are associated (or correlated) with Campine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campine has no effect on the direction of AGFA Gevaert i.e., AGFA Gevaert and Campine go up and down completely randomly.

Pair Corralation between AGFA Gevaert and Campine

Assuming the 90 days trading horizon AGFA Gevaert is expected to generate 1.18 times less return on investment than Campine. In addition to that, AGFA Gevaert is 1.38 times more volatile than Campine. It trades about 0.14 of its total potential returns per unit of risk. Campine is currently generating about 0.23 per unit of volatility. If you would invest  12,000  in Campine on December 30, 2024 and sell it today you would earn a total of  4,800  from holding Campine or generate 40.0% return on investment over 90 days.

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

AGFA Gevaert NV  vs.  Campine

AGFA Gevaert NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGFA Gevaert NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGFA Gevaert reported solid returns over the last few months and may actually be approaching a breakup point.

Campine

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Campine are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Campine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGFA Gevaert and Campine

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

The idea behind AGFA Gevaert NV and Campine 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.