Correlation Between ASR Nederland and CM NV

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

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

Diversification Opportunities for ASR Nederland and CM NV

0.79

Correlation Coefficient

ASR Nederland  CM NV

Poor diversification

The 3 months correlation between ASR and CMCOM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ASR Nederland NV and CM NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM NV and ASR Nederland 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 ASR Nederland NV are associated (or correlated) with CM NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM NV has no effect on the direction of ASR Nederland i.e., ASR Nederland and CM NV go up and down completely randomly.

Pair Corralation between ASR Nederland and CM NV

Assuming the 90 days trading horizon ASR Nederland is expected to generate 1.84 times less return on investment than CM NV. But when comparing it to its historical volatility, ASR Nederland NV is 4.23 times less risky than CM NV. It trades about 0.32 of its potential returns per unit of risk. CM NV is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  551.00  in CM NV on December 21, 2024 and sell it today you would earn a total of  185.00  from holding CM NV or generate 33.58% return on investment over 90 days.

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

ASR Nederland NV  vs.  CM NV

ASR Nederland NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ASR Nederland NV are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, ASR Nederland sustained solid returns over the last few months and may actually be approaching a breakup point.

CM NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CM NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CM NV sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASR Nederland and CM NV

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

The idea behind ASR Nederland NV and CM NV 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.