Correlation Between European Residential and Rubicon Organics

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

Diversification Opportunities for European Residential and Rubicon Organics

-0.8

Correlation Coefficient

European Residential  Rubicon Organics

Pay attention - limited upside

The 3 months correlation between European and Rubicon is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of European Residential i.e., European Residential and Rubicon Organics go up and down completely randomly.

Pair Corralation between European Residential and Rubicon Organics

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.54 times more return on investment than Rubicon Organics. However, European Residential Real is 1.86 times less risky than Rubicon Organics. It trades about 0.24 of its potential returns per unit of risk. Rubicon Organics is currently generating about -0.1 per unit of risk. If you would invest  268.00  in European Residential Real on September 2, 2024 and sell it today you would earn a total of  112.00  from holding European Residential Real or generate 41.79% return on investment over 90 days.

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

European Residential Real  vs.  Rubicon Organics

European Residential Real

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 18 (%) 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.

Rubicon Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubicon Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with European Residential and Rubicon Organics

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

The idea behind European Residential Real and Rubicon Organics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.