Correlation Between Ferrari NV and Exor NV

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

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

Diversification Opportunities for Ferrari NV and Exor NV

0.63

Correlation Coefficient

Ferrari NV  Exor NV

Poor diversification

The 3 months correlation between Ferrari and Exor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Exor NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exor NV and Ferrari 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 Ferrari NV are associated (or correlated) with Exor NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exor NV has no effect on the direction of Ferrari NV i.e., Ferrari NV and Exor NV go up and down completely randomly.

Pair Corralation between Ferrari NV and Exor NV

Given the investment horizon of 90 days Ferrari NV is expected to generate 1.03 times more return on investment than Exor NV. However, Ferrari NV is 1.03 times more volatile than Exor NV. It trades about 0.05 of its potential returns per unit of risk. Exor NV is currently generating about -0.01 per unit of risk. If you would invest  44,573  in Ferrari NV on December 4, 2024 and sell it today you would earn a total of  1,847  from holding Ferrari NV or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Ferrari NV  vs.  Exor NV

Ferrari NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrari NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ferrari NV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Exor NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exor NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Exor NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ferrari NV and Exor NV

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

The idea behind Ferrari NV and Exor 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.