Correlation Between Neovacs SA and Europlasma

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

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

Diversification Opportunities for Neovacs SA and Europlasma

0.87

Correlation Coefficient

Neovacs SA  Europlasma

Very poor diversification

The 3 months correlation between Neovacs and Europlasma is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Neovacs SA and Europlasma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europlasma SA and Neovacs SA 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 Neovacs SA are associated (or correlated) with Europlasma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europlasma SA has no effect on the direction of Neovacs SA i.e., Neovacs SA and Europlasma go up and down completely randomly.

Pair Corralation between Neovacs SA and Europlasma

Assuming the 90 days trading horizon Neovacs SA is expected to generate 1.16 times more return on investment than Europlasma. However, Neovacs SA is 1.16 times more volatile than Europlasma SA. It trades about 0.04 of its potential returns per unit of risk. Europlasma SA is currently generating about 0.01 per unit of risk. If you would invest  0.06  in Neovacs SA on September 2, 2024 and sell it today you would lose (0.04) from holding Neovacs SA or give up 66.67% of portfolio value over 90 days.

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

Neovacs SA  vs.  Europlasma SA

Neovacs SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neovacs SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Neovacs SA reported solid returns over the last few months and may actually be approaching a breakup point.

Europlasma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europlasma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Europlasma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neovacs SA and Europlasma

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

The idea behind Neovacs SA and Europlasma 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.