Correlation Between Central Europe and European Equity

Can any of the company-specific risk be diversified away by investing in both Central Europe and European Equity 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 Central Europe and European Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Europe Russia and European Equity Closed, you can compare the effects of market volatilities on Central Europe and European Equity 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 Central Europe with a short position of European Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Europe and European Equity.

Diversification Opportunities for Central Europe and European Equity

-0.75

Correlation Coefficient

Central Europe  European Equity

Pay attention - limited upside

The 3 months correlation between Central and European is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Central Europe Russia and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed and Central Europe 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 Central Europe Russia are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of Central Europe i.e., Central Europe and European Equity go up and down completely randomly.

Pair Corralation between Central Europe and European Equity

Considering the 90-day investment horizon Central Europe Russia is expected to under-perform the European Equity. In addition to that, Central Europe is 2.83 times more volatile than European Equity Closed. It trades about -0.11 of its total potential returns per unit of risk. European Equity Closed is currently generating about -0.05 per unit of volatility. If you would invest  848.00  in European Equity Closed on September 25, 2024 and sell it today you would lose (7.00) from holding European Equity Closed or give up 0.83% of portfolio value over 90 days.

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

Central Europe Russia  vs.  European Equity Closed

Central Europe Russia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Central Europe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

European Equity Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Equity Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Central Europe and European Equity

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

The idea behind Central Europe Russia and European Equity Closed 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.