Correlation Between Standard Uranium and European Residential

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

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

Diversification Opportunities for Standard Uranium and European Residential

-0.14

Correlation Coefficient

Standard Uranium  European Residential

Good diversification

The 3 months correlation between Standard and European is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Standard Uranium and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real and Standard Uranium 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 Standard Uranium are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Standard Uranium i.e., Standard Uranium and European Residential go up and down completely randomly.

Pair Corralation between Standard Uranium and European Residential

Assuming the 90 days trading horizon Standard Uranium is expected to generate 1.08 times more return on investment than European Residential. However, Standard Uranium is 1.08 times more volatile than European Residential Real. It trades about 0.08 of its potential returns per unit of risk. European Residential Real is currently generating about -0.18 per unit of risk. If you would invest  7.50  in Standard Uranium on October 12, 2024 and sell it today you would earn a total of  0.50  from holding Standard Uranium or generate 6.67% return on investment over 90 days.

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

Standard Uranium  vs.  European Residential Real

Standard Uranium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Uranium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Standard Uranium is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Standard Uranium and European Residential

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

The idea behind Standard Uranium and European Residential Real 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.