Correlation Between Barco NV and AGFA Gevaert

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

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

Diversification Opportunities for Barco NV and AGFA Gevaert

0.59

Correlation Coefficient

Barco NV  AGFA Gevaert

Very weak diversification

The 3 months correlation between Barco and AGFA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Barco NV and AGFA Gevaert NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGFA Gevaert NV and Barco 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 Barco NV are associated (or correlated) with AGFA Gevaert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGFA Gevaert NV has no effect on the direction of Barco NV i.e., Barco NV and AGFA Gevaert go up and down completely randomly.

Pair Corralation between Barco NV and AGFA Gevaert

Assuming the 90 days trading horizon Barco NV is expected to generate 1.59 times less return on investment than AGFA Gevaert. But when comparing it to its historical volatility, Barco NV is 1.25 times less risky than AGFA Gevaert. It trades about 0.12 of its potential returns per unit of risk. AGFA Gevaert NV is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  72.00  in AGFA Gevaert NV on December 28, 2024 and sell it today you would earn a total of  22.00  from holding AGFA Gevaert NV or generate 30.56% return on investment over 90 days.

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

Barco NV  vs.  AGFA Gevaert NV

Barco NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barco NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Barco NV reported solid returns over the last few months and may actually be approaching a breakup point.

AGFA Gevaert NV

Risk-Adjusted Performance

Good

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

Pair Trading with Barco NV and AGFA Gevaert

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

The idea behind Barco NV and AGFA Gevaert 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.