Correlation Between UCB SA and AGFA Gevaert

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

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

Diversification Opportunities for UCB SA and AGFA Gevaert

-0.44

Correlation Coefficient

UCB SA  AGFA Gevaert

Very good diversification

The 3 months correlation between UCB and AGFA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and AGFA Gevaert NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGFA Gevaert NV and UCB SA 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 UCB SA are associated (or correlated) with AGFA Gevaert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGFA Gevaert NV has no effect on the direction of UCB SA i.e., UCB SA and AGFA Gevaert go up and down completely randomly.

Pair Corralation between UCB SA and AGFA Gevaert

Assuming the 90 days trading horizon UCB SA is expected to under-perform the AGFA Gevaert. But the stock apears to be less risky and, when comparing its historical volatility, UCB SA is 1.47 times less risky than AGFA Gevaert. The stock trades about -0.01 of its potential returns per unit of risk. The AGFA Gevaert NV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  70.00  in AGFA Gevaert NV on December 20, 2024 and sell it today you would earn a total of  23.00  from holding AGFA Gevaert NV or generate 32.86% return on investment over 90 days.

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

UCB SA  vs.  AGFA Gevaert NV

UCB SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days UCB SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, UCB SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AGFA Gevaert NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGFA Gevaert NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGFA Gevaert reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UCB SA and AGFA Gevaert

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

The idea behind UCB SA and AGFA Gevaert 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 Transaction History module to view history of all your transactions and understand their impact on performance.