Correlation Between European Residential and Life Banc

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

Diversification Opportunities for European Residential and Life Banc

0.93

Correlation Coefficient

European Residential  Life Banc

Almost no diversification

The 3 months correlation between European and Life is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Life Banc Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Banc Split 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 Life Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Banc Split has no effect on the direction of European Residential i.e., European Residential and Life Banc go up and down completely randomly.

Pair Corralation between European Residential and Life Banc

Assuming the 90 days trading horizon European Residential Real is expected to generate 2.74 times more return on investment than Life Banc. However, European Residential is 2.74 times more volatile than Life Banc Split. It trades about 0.21 of its potential returns per unit of risk. Life Banc Split is currently generating about 0.4 per unit of risk. If you would invest  274.00  in European Residential Real on September 4, 2024 and sell it today you would earn a total of  100.00  from holding European Residential Real or generate 36.5% return on investment over 90 days.

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

European Residential Real  vs.  Life Banc Split

European Residential Real

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 16 (%) 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.

Life Banc Split

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Life Banc Split are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Life Banc displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Residential and Life Banc

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

The idea behind European Residential Real and Life Banc Split 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.