Correlation Between Sparinvest Europa and Sparinvest USA

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

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

Diversification Opportunities for Sparinvest Europa and Sparinvest USA

0.58

Correlation Coefficient

Sparinvest Europa  Sparinvest USA

Very weak diversification

The 3 months correlation between Sparinvest and Sparinvest is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest Europa Growth and Sparinvest USA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest USA Small and Sparinvest Europa 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 Sparinvest Europa Growth are associated (or correlated) with Sparinvest USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest USA Small has no effect on the direction of Sparinvest Europa i.e., Sparinvest Europa and Sparinvest USA go up and down completely randomly.

Pair Corralation between Sparinvest Europa and Sparinvest USA

Assuming the 90 days trading horizon Sparinvest Europa is expected to generate 1.65 times less return on investment than Sparinvest USA. But when comparing it to its historical volatility, Sparinvest Europa Growth is 1.26 times less risky than Sparinvest USA. It trades about 0.02 of its potential returns per unit of risk. Sparinvest USA Small is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,564  in Sparinvest USA Small on December 2, 2024 and sell it today you would earn a total of  1,751  from holding Sparinvest USA Small or generate 16.58% return on investment over 90 days.

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

Sparinvest Europa Growth  vs.  Sparinvest USA Small

Sparinvest Europa Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparinvest Europa Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent basic indicators, Sparinvest Europa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sparinvest USA Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparinvest USA Small has generated negative risk-adjusted returns adding no value to fund investors. Despite conflicting performance in the last few months, the Fund's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the fund institutional investors.

Pair Trading with Sparinvest Europa and Sparinvest USA

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

The idea behind Sparinvest Europa Growth and Sparinvest USA Small 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .