Correlation Between European Residential and M Split

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

Diversification Opportunities for European Residential and M Split

-0.03

Correlation Coefficient

European Residential  M Split

Good diversification

The 3 months correlation between European and XMF-PB is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and M Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Split 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 M Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Split Corp has no effect on the direction of European Residential i.e., European Residential and M Split go up and down completely randomly.

Pair Corralation between European Residential and M Split

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the M Split. In addition to that, European Residential is 9.3 times more volatile than M Split Corp. It trades about -0.03 of its total potential returns per unit of risk. M Split Corp is currently generating about 0.19 per unit of volatility. If you would invest  500.00  in M Split Corp on October 9, 2024 and sell it today you would earn a total of  35.00  from holding M Split Corp or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

European Residential Real  vs.  M Split Corp

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 latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

M Split Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Split Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, M Split may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with European Residential and M Split

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

The idea behind European Residential Real and M Split 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.