Correlation Between Arcadis NV and Digital Locations

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

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

Diversification Opportunities for Arcadis NV and Digital Locations

0.39

Correlation Coefficient

Arcadis NV  Digital Locations

Weak diversification

The 3 months correlation between Arcadis and Digital is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Arcadis NV and Digital Locations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Locations and Arcadis NV 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 Arcadis NV are associated (or correlated) with Digital Locations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Locations has no effect on the direction of Arcadis NV i.e., Arcadis NV and Digital Locations go up and down completely randomly.

Pair Corralation between Arcadis NV and Digital Locations

Assuming the 90 days horizon Arcadis NV is expected to generate 0.07 times more return on investment than Digital Locations. However, Arcadis NV is 14.82 times less risky than Digital Locations. It trades about -0.24 of its potential returns per unit of risk. Digital Locations is currently generating about -0.2 per unit of risk. If you would invest  6,769  in Arcadis NV on September 12, 2024 and sell it today you would lose (297.00) from holding Arcadis NV or give up 4.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Arcadis NV  vs.  Digital Locations

Arcadis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Digital Locations

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Locations are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Digital Locations exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arcadis NV and Digital Locations

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

The idea behind Arcadis NV and Digital Locations 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.