Correlation Between European Residential and Atrium Mortgage

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

By analyzing existing cross correlation between European Residential Real and Atrium Mortgage Investment, you can compare the effects of market volatilities on European Residential and Atrium Mortgage 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 European Residential with a short position of Atrium Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Atrium Mortgage.

Diversification Opportunities for European Residential and Atrium Mortgage

0.43

Correlation Coefficient

European Residential  Atrium Mortgage

Very weak diversification

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

Pair Corralation between European Residential and Atrium Mortgage

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Atrium Mortgage. In addition to that, European Residential is 8.16 times more volatile than Atrium Mortgage Investment. It trades about -0.05 of its total potential returns per unit of risk. Atrium Mortgage Investment is currently generating about -0.07 per unit of volatility. If you would invest  1,104  in Atrium Mortgage Investment on October 14, 2024 and sell it today you would lose (35.00) from holding Atrium Mortgage Investment or give up 3.17% of portfolio value over 90 days.

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

European Residential Real  vs.  Atrium Mortgage Investment

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Atrium Mortgage Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atrium Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Atrium Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with European Residential and Atrium Mortgage

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

The idea behind European Residential Real and Atrium Mortgage Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.