Correlation Between Brunel International and Koninklijke BAM

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

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

Diversification Opportunities for Brunel International and Koninklijke BAM

0.59

Correlation Coefficient

Brunel International  Koninklijke BAM

Very weak diversification

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

Pair Corralation between Brunel International and Koninklijke BAM

Assuming the 90 days trading horizon Brunel International is expected to generate 1.93 times less return on investment than Koninklijke BAM. But when comparing it to its historical volatility, Brunel International NV is 1.41 times less risky than Koninklijke BAM. It trades about 0.1 of its potential returns per unit of risk. Koninklijke BAM Groep is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Koninklijke BAM Groep on September 12, 2024 and sell it today you would earn a total of  55.00  from holding Koninklijke BAM Groep or generate 15.36% return on investment over 90 days.

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

Brunel International NV  vs.  Koninklijke BAM Groep

Brunel International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brunel International NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Brunel International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Koninklijke BAM Groep

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Brunel International and Koninklijke BAM

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

The idea behind Brunel International NV and Koninklijke BAM Groep 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.