Correlation Between NV Bekaert and Econocom Group

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

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

Diversification Opportunities for NV Bekaert and Econocom Group

0.04

Correlation Coefficient

NV Bekaert  Econocom Group

Significant diversification

The 3 months correlation between BEKB and Econocom is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NV Bekaert SA and Econocom Group SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Econocom Group SANV and NV Bekaert 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 NV Bekaert SA are associated (or correlated) with Econocom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Econocom Group SANV has no effect on the direction of NV Bekaert i.e., NV Bekaert and Econocom Group go up and down completely randomly.

Pair Corralation between NV Bekaert and Econocom Group

Assuming the 90 days trading horizon NV Bekaert SA is expected to generate 1.1 times more return on investment than Econocom Group. However, NV Bekaert is 1.1 times more volatile than Econocom Group SANV. It trades about -0.03 of its potential returns per unit of risk. Econocom Group SANV is currently generating about -0.05 per unit of risk. If you would invest  3,462  in NV Bekaert SA on September 15, 2024 and sell it today you would lose (128.00) from holding NV Bekaert SA or give up 3.7% of portfolio value over 90 days.

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

NV Bekaert SA  vs.  Econocom Group SANV

NV Bekaert SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NV Bekaert SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NV Bekaert is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Econocom Group SANV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Econocom Group SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Econocom Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NV Bekaert and Econocom Group

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

The idea behind NV Bekaert SA and Econocom Group SANV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.