Correlation Between European Residential and Graphite One

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

Diversification Opportunities for European Residential and Graphite One

-0.62

Correlation Coefficient

European Residential  Graphite One

Excellent diversification

The 3 months correlation between European and Graphite is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One 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 Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of European Residential i.e., European Residential and Graphite One go up and down completely randomly.

Pair Corralation between European Residential and Graphite One

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.52 times more return on investment than Graphite One. However, European Residential Real is 1.94 times less risky than Graphite One. It trades about 0.2 of its potential returns per unit of risk. Graphite One is currently generating about 0.04 per unit of risk. If you would invest  227.00  in European Residential Real on September 28, 2024 and sell it today you would earn a total of  155.00  from holding European Residential Real or generate 68.28% return on investment over 90 days.

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

European Residential Real  vs.  Graphite One

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 unfluctuating technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Graphite One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphite One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Graphite One is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with European Residential and Graphite One

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

The idea behind European Residential Real and Graphite One 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.