Correlation Between Strategic Investments and EuropaCorp

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

By analyzing existing cross correlation between Strategic Investments AS and EuropaCorp, you can compare the effects of market volatilities on Strategic Investments and EuropaCorp 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 Strategic Investments with a short position of EuropaCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Investments and EuropaCorp.

Diversification Opportunities for Strategic Investments and EuropaCorp

0.52

Correlation Coefficient

Strategic Investments  EuropaCorp

Very weak diversification

The 3 months correlation between Strategic and EuropaCorp is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and EuropaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuropaCorp and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with EuropaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuropaCorp has no effect on the direction of Strategic Investments i.e., Strategic Investments and EuropaCorp go up and down completely randomly.

Pair Corralation between Strategic Investments and EuropaCorp

Assuming the 90 days horizon Strategic Investments AS is expected to under-perform the EuropaCorp. In addition to that, Strategic Investments is 1.47 times more volatile than EuropaCorp. It trades about -0.09 of its total potential returns per unit of risk. EuropaCorp is currently generating about -0.1 per unit of volatility. If you would invest  45.00  in EuropaCorp on October 8, 2024 and sell it today you would lose (12.00) from holding EuropaCorp or give up 26.67% of portfolio value over 90 days.

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

Strategic Investments AS  vs.  EuropaCorp

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

EuropaCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuropaCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Strategic Investments and EuropaCorp

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

The idea behind Strategic Investments AS and EuropaCorp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.