Correlation Between ForFarmers and Eurocommercial Properties

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

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

Diversification Opportunities for ForFarmers and Eurocommercial Properties

-0.62

Correlation Coefficient

ForFarmers  Eurocommercial Properties

Excellent diversification

The 3 months correlation between ForFarmers and Eurocommercial is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ForFarmers NV and Eurocommercial Properties NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocommercial Properties and ForFarmers 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 ForFarmers NV are associated (or correlated) with Eurocommercial Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocommercial Properties has no effect on the direction of ForFarmers i.e., ForFarmers and Eurocommercial Properties go up and down completely randomly.

Pair Corralation between ForFarmers and Eurocommercial Properties

Assuming the 90 days trading horizon ForFarmers NV is expected to generate 1.24 times more return on investment than Eurocommercial Properties. However, ForFarmers is 1.24 times more volatile than Eurocommercial Properties NV. It trades about 0.01 of its potential returns per unit of risk. Eurocommercial Properties NV is currently generating about -0.03 per unit of risk. If you would invest  328.00  in ForFarmers NV on October 26, 2024 and sell it today you would earn a total of  2.00  from holding ForFarmers NV or generate 0.61% return on investment over 90 days.

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

ForFarmers NV  vs.  Eurocommercial Properties NV

ForFarmers NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ForFarmers NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ForFarmers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eurocommercial Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eurocommercial Properties NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eurocommercial Properties is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ForFarmers and Eurocommercial Properties

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

The idea behind ForFarmers NV and Eurocommercial Properties NV 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.