Correlation Between COMMERCIAL VEHICLE and EuropaCorp

Can any of the company-specific risk be diversified away by investing in both COMMERCIAL VEHICLE and EuropaCorp 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 COMMERCIAL VEHICLE and EuropaCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMERCIAL VEHICLE and EuropaCorp, you can compare the effects of market volatilities on COMMERCIAL VEHICLE and EuropaCorp 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 COMMERCIAL VEHICLE with a short position of EuropaCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL VEHICLE and EuropaCorp.

Diversification Opportunities for COMMERCIAL VEHICLE and EuropaCorp

-0.6

Correlation Coefficient

COMMERCIAL VEHICLE  EuropaCorp

Excellent diversification

The 3 months correlation between COMMERCIAL and EuropaCorp is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and EuropaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuropaCorp and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE are associated (or correlated) with EuropaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuropaCorp has no effect on the direction of COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and EuropaCorp go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and EuropaCorp

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the EuropaCorp. But the stock apears to be less risky and, when comparing its historical volatility, COMMERCIAL VEHICLE is 1.63 times less risky than EuropaCorp. The stock trades about -0.18 of its potential returns per unit of risk. The EuropaCorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31.00  in EuropaCorp on December 25, 2024 and sell it today you would earn a total of  13.00  from holding EuropaCorp or generate 41.94% return on investment over 90 days.

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

COMMERCIAL VEHICLE  vs.  EuropaCorp

COMMERCIAL VEHICLE

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

EuropaCorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EuropaCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EuropaCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMERCIAL VEHICLE and EuropaCorp

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

The idea behind COMMERCIAL VEHICLE and EuropaCorp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.