Correlation Between Vonovia SE and Beaver Coal

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

By analyzing existing cross correlation between Vonovia SE and Beaver Coal Co, you can compare the effects of market volatilities on Vonovia SE and Beaver Coal 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 Vonovia SE with a short position of Beaver Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vonovia SE and Beaver Coal.

Diversification Opportunities for Vonovia SE and Beaver Coal

-0.49

Correlation Coefficient

Vonovia SE  Beaver Coal

Very good diversification

The 3 months correlation between Vonovia and Beaver is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vonovia SE and Beaver Coal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beaver Coal and Vonovia SE 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 Vonovia SE are associated (or correlated) with Beaver Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beaver Coal has no effect on the direction of Vonovia SE i.e., Vonovia SE and Beaver Coal go up and down completely randomly.

Pair Corralation between Vonovia SE and Beaver Coal

Assuming the 90 days horizon Vonovia SE is expected to under-perform the Beaver Coal. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vonovia SE is 1.24 times less risky than Beaver Coal. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Beaver Coal Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  340,000  in Beaver Coal Co on December 29, 2024 and sell it today you would earn a total of  28,500  from holding Beaver Coal Co or generate 8.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Vonovia SE  vs.  Beaver Coal Co

Vonovia SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Beaver Coal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beaver Coal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Beaver Coal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vonovia SE and Beaver Coal

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

The idea behind Vonovia SE and Beaver Coal Co 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.

Check out your portfolio center.

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.