Correlation Between Barco NV and UCB SA

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

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

Diversification Opportunities for Barco NV and UCB SA

-0.68

Correlation Coefficient

Barco NV  UCB SA

Excellent diversification

The 3 months correlation between Barco and UCB is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barco NV and UCB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCB SA 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 UCB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UCB SA has no effect on the direction of Barco NV i.e., Barco NV and UCB SA go up and down completely randomly.

Pair Corralation between Barco NV and UCB SA

Assuming the 90 days trading horizon Barco NV is expected to under-perform the UCB SA. In addition to that, Barco NV is 1.03 times more volatile than UCB SA. It trades about -0.12 of its total potential returns per unit of risk. UCB SA is currently generating about 0.15 per unit of volatility. If you would invest  15,930  in UCB SA on September 18, 2024 and sell it today you would earn a total of  2,620  from holding UCB SA or generate 16.45% return on investment over 90 days.

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

Barco NV  vs.  UCB SA

Barco NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barco NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

UCB SA

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Barco NV and UCB SA

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

The idea behind Barco NV and UCB SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.