Correlation Between Koninklijke Philips and SLR Investment

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

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

Diversification Opportunities for Koninklijke Philips and SLR Investment

-0.49

Correlation Coefficient

Koninklijke Philips  SLR Investment

Very good diversification

The 3 months correlation between Koninklijke and SLR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and SLR Investment go up and down completely randomly.

Pair Corralation between Koninklijke Philips and SLR Investment

Assuming the 90 days trading horizon Koninklijke Philips NV is expected to generate 1.5 times more return on investment than SLR Investment. However, Koninklijke Philips is 1.5 times more volatile than SLR Investment Corp. It trades about 0.15 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.18 per unit of risk. If you would invest  2,380  in Koninklijke Philips NV on October 26, 2024 and sell it today you would earn a total of  80.00  from holding Koninklijke Philips NV or generate 3.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Koninklijke Philips NV  vs.  SLR Investment Corp

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Koninklijke Philips is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SLR Investment Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SLR Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Philips and SLR Investment

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

The idea behind Koninklijke Philips NV and SLR Investment 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.