Correlation Between EuropaCorp and Equitable Holdings

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

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

Diversification Opportunities for EuropaCorp and Equitable Holdings

0.41

Correlation Coefficient

EuropaCorp  Equitable Holdings

Very weak diversification

The 3 months correlation between EuropaCorp and Equitable is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding EuropaCorp and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings and EuropaCorp 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 EuropaCorp are associated (or correlated) with Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of EuropaCorp i.e., EuropaCorp and Equitable Holdings go up and down completely randomly.

Pair Corralation between EuropaCorp and Equitable Holdings

Assuming the 90 days horizon EuropaCorp is expected to generate 3.94 times more return on investment than Equitable Holdings. However, EuropaCorp is 3.94 times more volatile than Equitable Holdings. It trades about 0.14 of its potential returns per unit of risk. Equitable Holdings is currently generating about 0.13 per unit of risk. If you would invest  34.00  in EuropaCorp on December 2, 2024 and sell it today you would earn a total of  18.00  from holding EuropaCorp or generate 52.94% return on investment over 90 days.

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

EuropaCorp  vs.  Equitable Holdings

EuropaCorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EuropaCorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EuropaCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Equitable Holdings

Risk-Adjusted Performance

OK

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

Pair Trading with EuropaCorp and Equitable Holdings

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

The idea behind EuropaCorp and Equitable Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.