Correlation Between European Residential and Kesselrun Resources

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

Diversification Opportunities for European Residential and Kesselrun Resources

-0.37

Correlation Coefficient

European Residential  Kesselrun Resources

Very good diversification

The 3 months correlation between European and Kesselrun is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Kesselrun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesselrun Resources 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 Kesselrun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesselrun Resources has no effect on the direction of European Residential i.e., European Residential and Kesselrun Resources go up and down completely randomly.

Pair Corralation between European Residential and Kesselrun Resources

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Kesselrun Resources. But the stock apears to be less risky and, when comparing its historical volatility, European Residential Real is 1.52 times less risky than Kesselrun Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Kesselrun Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Kesselrun Resources on October 8, 2024 and sell it today you would lose (1.00) from holding Kesselrun Resources or give up 22.22% of portfolio value over 90 days.

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

European Residential Real  vs.  Kesselrun Resources

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.

Kesselrun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kesselrun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kesselrun Resources 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 Kesselrun Resources

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

The idea behind European Residential Real and Kesselrun Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.