Correlation Between Etablissementen Franz and UCB SA

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

By analyzing existing cross correlation between Etablissementen Franz Colruyt and UCB SA, you can compare the effects of market volatilities on Etablissementen Franz 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 Etablissementen Franz with a short position of UCB SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etablissementen Franz and UCB SA.

Diversification Opportunities for Etablissementen Franz and UCB SA

-0.04

Correlation Coefficient

Etablissementen Franz  UCB SA

Good diversification

The 3 months correlation between Etablissementen and UCB is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Etablissementen Franz Colruyt and UCB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCB SA and Etablissementen Franz 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 Etablissementen Franz Colruyt 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 Etablissementen Franz i.e., Etablissementen Franz and UCB SA go up and down completely randomly.

Pair Corralation between Etablissementen Franz and UCB SA

Assuming the 90 days trading horizon Etablissementen Franz Colruyt is expected to under-perform the UCB SA. But the stock apears to be less risky and, when comparing its historical volatility, Etablissementen Franz Colruyt is 1.11 times less risky than UCB SA. The stock trades about -0.01 of its potential returns per unit of risk. The UCB SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,703  in UCB SA on September 17, 2024 and sell it today you would earn a total of  10,362  from holding UCB SA or generate 134.52% return on investment over 90 days.

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

Etablissementen Franz Colruyt  vs.  UCB SA

Etablissementen Franz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etablissementen Franz Colruyt has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

UCB SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA are ranked lower than 10 (%) 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 Etablissementen Franz and UCB SA

The main advantage of trading using opposite Etablissementen Franz and UCB SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etablissementen Franz 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 Etablissementen Franz Colruyt 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.