Correlation Between Koninklijke BAM and Arcadis NV

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

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

Diversification Opportunities for Koninklijke BAM and Arcadis NV

0.08

Correlation Coefficient

Koninklijke BAM  Arcadis NV

Significant diversification

The 3 months correlation between Koninklijke and Arcadis is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke BAM Groep and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV and Koninklijke BAM 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 Koninklijke BAM Groep are associated (or correlated) with Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of Koninklijke BAM i.e., Koninklijke BAM and Arcadis NV go up and down completely randomly.

Pair Corralation between Koninklijke BAM and Arcadis NV

Assuming the 90 days trading horizon Koninklijke BAM Groep is expected to generate 1.9 times more return on investment than Arcadis NV. However, Koninklijke BAM is 1.9 times more volatile than Arcadis NV. It trades about 0.11 of its potential returns per unit of risk. Arcadis NV is currently generating about 0.09 per unit of risk. If you would invest  205.00  in Koninklijke BAM Groep on October 27, 2024 and sell it today you would earn a total of  205.00  from holding Koninklijke BAM Groep or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Koninklijke BAM Groep  vs.  Arcadis NV

Koninklijke BAM Groep

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke BAM Groep has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Koninklijke BAM is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Koninklijke BAM and Arcadis NV

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

The idea behind Koninklijke BAM Groep and Arcadis 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.