Correlation Between Value8 NV and Koninklijke KPN

Can any of the company-specific risk be diversified away by investing in both Value8 NV and Koninklijke KPN 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 Value8 NV and Koninklijke KPN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Value8 NV and Koninklijke KPN NV, you can compare the effects of market volatilities on Value8 NV and Koninklijke KPN 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 Value8 NV with a short position of Koninklijke KPN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value8 NV and Koninklijke KPN.

Diversification Opportunities for Value8 NV and Koninklijke KPN

-0.13

Correlation Coefficient

Value8 NV  Koninklijke KPN

Good diversification

The 3 months correlation between Value8 and Koninklijke is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Value8 NV and Koninklijke KPN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke KPN NV and Value8 NV 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 Value8 NV are associated (or correlated) with Koninklijke KPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke KPN NV has no effect on the direction of Value8 NV i.e., Value8 NV and Koninklijke KPN go up and down completely randomly.

Pair Corralation between Value8 NV and Koninklijke KPN

Assuming the 90 days trading horizon Value8 NV is expected to generate 1.24 times more return on investment than Koninklijke KPN. However, Value8 NV is 1.24 times more volatile than Koninklijke KPN NV. It trades about -0.01 of its potential returns per unit of risk. Koninklijke KPN NV is currently generating about -0.01 per unit of risk. If you would invest  585.00  in Value8 NV on November 28, 2024 and sell it today you would lose (5.00) from holding Value8 NV or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Value8 NV  vs.  Koninklijke KPN NV

Value8 NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value8 NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Value8 NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Koninklijke KPN NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koninklijke KPN NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Koninklijke KPN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Value8 NV and Koninklijke KPN

The main advantage of trading using opposite Value8 NV and Koninklijke KPN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value8 NV position performs unexpectedly, Koninklijke KPN 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 KPN will offset losses from the drop in Koninklijke KPN's long position.

The idea behind Value8 NV and Koninklijke KPN 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.