Correlation Between Arcadis NV and Dirtt Environmen

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

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

Diversification Opportunities for Arcadis NV and Dirtt Environmen

0.8

Correlation Coefficient

Arcadis NV  Dirtt Environmen

Very poor diversification

The 3 months correlation between Arcadis and Dirtt is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arcadis NV and Dirtt Environmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dirtt Environmen 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 Dirtt Environmen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dirtt Environmen has no effect on the direction of Arcadis NV i.e., Arcadis NV and Dirtt Environmen go up and down completely randomly.

Pair Corralation between Arcadis NV and Dirtt Environmen

Assuming the 90 days horizon Arcadis NV is expected to generate 0.26 times more return on investment than Dirtt Environmen. However, Arcadis NV is 3.83 times less risky than Dirtt Environmen. It trades about 0.06 of its potential returns per unit of risk. Dirtt Environmen is currently generating about -0.09 per unit of risk. If you would invest  4,351  in Arcadis NV on October 10, 2024 and sell it today you would earn a total of  1,682  from holding Arcadis NV or generate 38.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	34.4%
Values	Daily Returns

Arcadis NV  vs.  Dirtt Environmen

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 weak 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.

Dirtt Environmen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dirtt Environmen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dirtt Environmen is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arcadis NV and Dirtt Environmen

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

The idea behind Arcadis NV and Dirtt Environmen 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.