Correlation Between European Residential and Minco Capital

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

Diversification Opportunities for European Residential and Minco Capital

0.04

Correlation Coefficient

European Residential  Minco Capital

Significant diversification

The 3 months correlation between European and Minco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Minco Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minco Capital Corp 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 Minco Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minco Capital Corp has no effect on the direction of European Residential i.e., European Residential and Minco Capital go up and down completely randomly.

Pair Corralation between European Residential and Minco Capital

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.26 times more return on investment than Minco Capital. However, European Residential Real is 3.84 times less risky than Minco Capital. It trades about 0.09 of its potential returns per unit of risk. Minco Capital Corp is currently generating about -0.03 per unit of risk. If you would invest  233.00  in European Residential Real on December 28, 2024 and sell it today you would earn a total of  21.00  from holding European Residential Real or generate 9.01% return on investment over 90 days.

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

European Residential Real  vs.  Minco Capital Corp

European Residential Real

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Minco Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minco Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with European Residential and Minco Capital

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

The idea behind European Residential Real and Minco Capital Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.