Correlation Between Euronext and Allfunds

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

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

Diversification Opportunities for Euronext and Allfunds

-0.43

Correlation Coefficient

Euronext  Allfunds

Very good diversification

The 3 months correlation between Euronext and Allfunds is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Allfunds Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allfunds Group and Euronext 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 Euronext NV are associated (or correlated) with Allfunds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allfunds Group has no effect on the direction of Euronext i.e., Euronext and Allfunds go up and down completely randomly.

Pair Corralation between Euronext and Allfunds

Assuming the 90 days trading horizon Euronext NV is expected to generate 0.6 times more return on investment than Allfunds. However, Euronext NV is 1.67 times less risky than Allfunds. It trades about 0.26 of its potential returns per unit of risk. Allfunds Group is currently generating about -0.1 per unit of risk. If you would invest  10,570  in Euronext NV on December 4, 2024 and sell it today you would earn a total of  1,680  from holding Euronext NV or generate 15.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Euronext NV  vs.  Allfunds Group

Euronext NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Euronext NV are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Euronext sustained solid returns over the last few months and may actually be approaching a breakup point.

Allfunds Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allfunds Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Euronext and Allfunds

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

The idea behind Euronext NV and Allfunds Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.