Correlation Between Groep Brussel and Tessenderlo

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

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

Diversification Opportunities for Groep Brussel and Tessenderlo

0.71

Correlation Coefficient

Groep Brussel  Tessenderlo

Poor diversification

The 3 months correlation between Groep and Tessenderlo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Groep Brussel Lambert and Tessenderlo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tessenderlo and Groep Brussel 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 Groep Brussel Lambert are associated (or correlated) with Tessenderlo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tessenderlo has no effect on the direction of Groep Brussel i.e., Groep Brussel and Tessenderlo go up and down completely randomly.

Pair Corralation between Groep Brussel and Tessenderlo

Assuming the 90 days trading horizon Groep Brussel Lambert is expected to generate 0.77 times more return on investment than Tessenderlo. However, Groep Brussel Lambert is 1.3 times less risky than Tessenderlo. It trades about -0.09 of its potential returns per unit of risk. Tessenderlo is currently generating about -0.13 per unit of risk. If you would invest  6,920  in Groep Brussel Lambert on August 31, 2024 and sell it today you would lose (370.00) from holding Groep Brussel Lambert or give up 5.35% of portfolio value over 90 days.

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

Groep Brussel Lambert  vs.  Tessenderlo

Groep Brussel Lambert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groep Brussel Lambert has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Groep Brussel is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tessenderlo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tessenderlo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Groep Brussel and Tessenderlo

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

The idea behind Groep Brussel Lambert and Tessenderlo 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.