Correlation Between European Residential and Fremont Gold

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

Diversification Opportunities for European Residential and Fremont Gold

0.57

Correlation Coefficient

European Residential  Fremont Gold

Very weak diversification

The 3 months correlation between European and Fremont is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Fremont Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fremont Gold 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 Fremont Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fremont Gold has no effect on the direction of European Residential i.e., European Residential and Fremont Gold go up and down completely randomly.

Pair Corralation between European Residential and Fremont Gold

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Fremont Gold. But the stock apears to be less risky and, when comparing its historical volatility, European Residential Real is 1.83 times less risky than Fremont Gold. The stock trades about -0.04 of its potential returns per unit of risk. The Fremont Gold is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Fremont Gold on October 24, 2024 and sell it today you would lose (2.00) from holding Fremont Gold or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.87%
Values	Daily Returns

European Residential Real  vs.  Fremont Gold

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.

Fremont Gold

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fremont Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Fremont Gold may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with European Residential and Fremont Gold

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

The idea behind European Residential Real and Fremont Gold 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.