Correlation Between European Residential and Liberty Defense
Can any of the company-specific risk be diversified away by investing in both European Residential and Liberty Defense 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 Liberty Defense 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 Liberty Defense Holdings, you can compare the effects of market volatilities on European Residential and Liberty Defense 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 Liberty Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Liberty Defense.
Diversification Opportunities for European Residential and Liberty Defense
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between European and Liberty is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings 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 Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of European Residential i.e., European Residential and Liberty Defense go up and down completely randomly.
Pair Corralation between European Residential and Liberty Defense
Assuming the 90 days trading horizon European Residential is expected to generate 9.76 times less return on investment than Liberty Defense. But when comparing it to its historical volatility, European Residential Real is 6.7 times less risky than Liberty Defense. It trades about 0.16 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Liberty Defense Holdings on September 25, 2024 and sell it today you would earn a total of 22.00 from holding Liberty Defense Holdings or generate 57.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 90.91% |
Values | Daily Returns |
European Residential Real vs. Liberty Defense Holdings
Performance |
Timeline |
European Residential Real |
Liberty Defense Holdings |
European Residential and Liberty Defense Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with European Residential and Liberty Defense
The main advantage of trading using opposite European Residential and Liberty Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Liberty Defense 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 Liberty Defense will offset losses from the drop in Liberty Defense's long position.European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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