Correlation Between Sparinvest Mellemlange and Sparinvest Europa

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

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

Diversification Opportunities for Sparinvest Mellemlange and Sparinvest Europa

0.35

Correlation Coefficient

Sparinvest Mellemlange  Sparinvest Europa

Weak diversification

The 3 months correlation between Sparinvest and Sparinvest is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest Mellemlange and Sparinvest Europa Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest Europa Growth and Sparinvest Mellemlange 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 Mellemlange are associated (or correlated) with Sparinvest Europa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest Europa Growth has no effect on the direction of Sparinvest Mellemlange i.e., Sparinvest Mellemlange and Sparinvest Europa go up and down completely randomly.

Pair Corralation between Sparinvest Mellemlange and Sparinvest Europa

Assuming the 90 days trading horizon Sparinvest Mellemlange is expected to under-perform the Sparinvest Europa. But the fund apears to be less risky and, when comparing its historical volatility, Sparinvest Mellemlange is 3.87 times less risky than Sparinvest Europa. The fund trades about -0.04 of its potential returns per unit of risk. The Sparinvest Europa Growth is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  15,946  in Sparinvest Europa Growth on October 25, 2024 and sell it today you would earn a total of  761.00  from holding Sparinvest Europa Growth or generate 4.77% return on investment over 90 days.

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

Sparinvest Mellemlange  vs.  Sparinvest Europa Growth

Sparinvest Mellemlange

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sparinvest Europa Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest Europa Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Sparinvest Mellemlange and Sparinvest Europa

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

The idea behind Sparinvest Mellemlange and Sparinvest Europa Growth 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.