Correlation Between TF Bank and Koninklijke Heijmans

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

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

Diversification Opportunities for TF Bank and Koninklijke Heijmans

0.57

Correlation Coefficient

TF Bank  Koninklijke Heijmans

Very weak diversification

The 3 months correlation between TFBANK and Koninklijke is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and Koninklijke Heijmans NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Heijmans and TF Bank 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 TF Bank AB are associated (or correlated) with Koninklijke Heijmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Heijmans has no effect on the direction of TF Bank i.e., TF Bank and Koninklijke Heijmans go up and down completely randomly.

Pair Corralation between TF Bank and Koninklijke Heijmans

Assuming the 90 days trading horizon TF Bank AB is expected to generate 0.81 times more return on investment than Koninklijke Heijmans. However, TF Bank AB is 1.24 times less risky than Koninklijke Heijmans. It trades about 0.23 of its potential returns per unit of risk. Koninklijke Heijmans NV is currently generating about 0.12 per unit of risk. If you would invest  26,500  in TF Bank AB on September 4, 2024 and sell it today you would earn a total of  9,300  from holding TF Bank AB or generate 35.09% return on investment over 90 days.

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

TF Bank AB  vs.  Koninklijke Heijmans NV

TF Bank AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Koninklijke Heijmans

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Heijmans NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Koninklijke Heijmans sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TF Bank and Koninklijke Heijmans

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

The idea behind TF Bank AB and Koninklijke Heijmans 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.