Correlation Between ASR Nederland and CVC Capital

Can any of the company-specific risk be diversified away by investing in both ASR Nederland and CVC Capital 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 CVC Capital 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 CVC Capital Partners, you can compare the effects of market volatilities on ASR Nederland and CVC Capital 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 CVC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASR Nederland and CVC Capital.

Diversification Opportunities for ASR Nederland and CVC Capital

0.64

Correlation Coefficient

ASR Nederland  CVC Capital

Poor diversification

The 3 months correlation between ASR and CVC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ASR Nederland NV and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners 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 CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of ASR Nederland i.e., ASR Nederland and CVC Capital go up and down completely randomly.

Pair Corralation between ASR Nederland and CVC Capital

Assuming the 90 days trading horizon ASR Nederland is expected to generate 4.78 times less return on investment than CVC Capital. But when comparing it to its historical volatility, ASR Nederland NV is 1.1 times less risky than CVC Capital. It trades about 0.03 of its potential returns per unit of risk. CVC Capital Partners is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,635  in CVC Capital Partners on September 18, 2024 and sell it today you would earn a total of  565.00  from holding CVC Capital Partners or generate 34.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	32.87%
Values	Daily Returns

ASR Nederland NV  vs.  CVC Capital Partners

ASR Nederland NV

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASR Nederland NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ASR Nederland is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CVC Capital Partners

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Capital Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, CVC Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ASR Nederland and CVC Capital

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

The idea behind ASR Nederland NV and CVC Capital Partners 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.