Correlation Between Eurocastle Investment and Brunel International

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

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

Diversification Opportunities for Eurocastle Investment and Brunel International

0.4

Correlation Coefficient

Eurocastle Investment  Brunel International

Very weak diversification

The 3 months correlation between Eurocastle and Brunel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eurocastle Investment and Brunel International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunel International and Eurocastle Investment 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 Eurocastle Investment are associated (or correlated) with Brunel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunel International has no effect on the direction of Eurocastle Investment i.e., Eurocastle Investment and Brunel International go up and down completely randomly.

Pair Corralation between Eurocastle Investment and Brunel International

Assuming the 90 days trading horizon Eurocastle Investment is expected to generate 1.85 times more return on investment than Brunel International. However, Eurocastle Investment is 1.85 times more volatile than Brunel International NV. It trades about 0.16 of its potential returns per unit of risk. Brunel International NV is currently generating about 0.2 per unit of risk. If you would invest  800.00  in Eurocastle Investment on December 5, 2024 and sell it today you would earn a total of  50.00  from holding Eurocastle Investment or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Eurocastle Investment  vs.  Brunel International NV

Eurocastle Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eurocastle Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Eurocastle Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brunel International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brunel International NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Brunel International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eurocastle Investment and Brunel International

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

The idea behind Eurocastle Investment and Brunel International NV 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.