Correlation Between Fugro NV and Koninklijke BAM

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

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

Diversification Opportunities for Fugro NV and Koninklijke BAM

-0.45

Correlation Coefficient

Fugro NV  Koninklijke BAM

Very good diversification

The 3 months correlation between Fugro and Koninklijke is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fugro NV and Koninklijke BAM Groep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke BAM Groep and Fugro NV 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 Fugro NV are associated (or correlated) with Koninklijke BAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke BAM Groep has no effect on the direction of Fugro NV i.e., Fugro NV and Koninklijke BAM go up and down completely randomly.

Pair Corralation between Fugro NV and Koninklijke BAM

Assuming the 90 days trading horizon Fugro NV is expected to under-perform the Koninklijke BAM. But the stock apears to be less risky and, when comparing its historical volatility, Fugro NV is 1.42 times less risky than Koninklijke BAM. The stock trades about -0.18 of its potential returns per unit of risk. The Koninklijke BAM Groep is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Koninklijke BAM Groep on November 28, 2024 and sell it today you would earn a total of  99.00  from holding Koninklijke BAM Groep or generate 25.13% return on investment over 90 days.

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

Fugro NV  vs.  Koninklijke BAM Groep

Fugro NV

Risk-Adjusted Performance

Very Weak

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

Koninklijke BAM Groep

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke BAM Groep are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Koninklijke BAM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fugro NV and Koninklijke BAM

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

The idea behind Fugro NV and Koninklijke BAM Groep 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.