Correlation Between GROUNDS REST and VONOVIA SE

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

By analyzing existing cross correlation between GROUNDS REST NA and VONOVIA SE ADR, you can compare the effects of market volatilities on GROUNDS REST and VONOVIA SE 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 GROUNDS REST with a short position of VONOVIA SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GROUNDS REST and VONOVIA SE.

Diversification Opportunities for GROUNDS REST and VONOVIA SE

-0.54

Correlation Coefficient

GROUNDS REST  VONOVIA SE

Excellent diversification

The 3 months correlation between GROUNDS and VONOVIA is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GROUNDS REST NA and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR and GROUNDS REST 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 GROUNDS REST NA are associated (or correlated) with VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of GROUNDS REST i.e., GROUNDS REST and VONOVIA SE go up and down completely randomly.

Pair Corralation between GROUNDS REST and VONOVIA SE

Assuming the 90 days trading horizon GROUNDS REST NA is expected to generate 5.56 times more return on investment than VONOVIA SE. However, GROUNDS REST is 5.56 times more volatile than VONOVIA SE ADR. It trades about 0.34 of its potential returns per unit of risk. VONOVIA SE ADR is currently generating about -0.46 per unit of risk. If you would invest  112.00  in GROUNDS REST NA on October 17, 2024 and sell it today you would earn a total of  62.00  from holding GROUNDS REST NA or generate 55.36% return on investment over 90 days.

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

GROUNDS REST NA  vs.  VONOVIA SE ADR

GROUNDS REST NA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GROUNDS REST NA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, GROUNDS REST reported solid returns over the last few months and may actually be approaching a breakup point.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GROUNDS REST and VONOVIA SE

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

The idea behind GROUNDS REST NA and VONOVIA SE ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.