Correlation Between European Residential and Calfrac Well

Can any of the company-specific risk be diversified away by investing in both European Residential and Calfrac Well 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 Calfrac Well 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 Calfrac Well Services, you can compare the effects of market volatilities on European Residential and Calfrac Well 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 Calfrac Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Calfrac Well.

Diversification Opportunities for European Residential and Calfrac Well

0.17

Correlation Coefficient

European Residential  Calfrac Well

Average diversification

The 3 months correlation between European and Calfrac is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services 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 Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of European Residential i.e., European Residential and Calfrac Well go up and down completely randomly.

Pair Corralation between European Residential and Calfrac Well

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.78 times more return on investment than Calfrac Well. However, European Residential Real is 1.28 times less risky than Calfrac Well. It trades about 0.04 of its potential returns per unit of risk. Calfrac Well Services is currently generating about -0.04 per unit of risk. If you would invest  294.00  in European Residential Real on October 4, 2024 and sell it today you would earn a total of  86.00  from holding European Residential Real or generate 29.25% return on investment over 90 days.

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

European Residential Real  vs.  Calfrac Well Services

European Residential Real

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Calfrac Well Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calfrac Well 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 Calfrac Well

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

The idea behind European Residential Real and Calfrac Well Services 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..