Correlation Between R Co and BEKA LUX

Can any of the company-specific risk be diversified away by investing in both R Co and BEKA LUX 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 R Co and BEKA LUX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between R co Valor F and BEKA LUX SICAV, you can compare the effects of market volatilities on R Co and BEKA LUX 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 R Co with a short position of BEKA LUX. Check out your portfolio center. Please also check ongoing floating volatility patterns of R Co and BEKA LUX.

Diversification Opportunities for R Co and BEKA LUX

0.77

Correlation Coefficient

R Co  BEKA LUX

Poor diversification

The 3 months correlation between 0P00017SX2 and BEKA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding R co Valor F and BEKA LUX SICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEKA LUX SICAV and R Co 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 R co Valor F are associated (or correlated) with BEKA LUX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEKA LUX SICAV has no effect on the direction of R Co i.e., R Co and BEKA LUX go up and down completely randomly.

Pair Corralation between R Co and BEKA LUX

Assuming the 90 days trading horizon R co Valor F is expected to generate 2.81 times more return on investment than BEKA LUX. However, R Co is 2.81 times more volatile than BEKA LUX SICAV. It trades about 0.26 of its potential returns per unit of risk. BEKA LUX SICAV is currently generating about 0.18 per unit of risk. If you would invest  276,163  in R co Valor F on September 6, 2024 and sell it today you would earn a total of  32,288  from holding R co Valor F or generate 11.69% return on investment over 90 days.

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

R co Valor F  vs.  BEKA LUX SICAV

R co Valor

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, R Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BEKA LUX SICAV

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BEKA LUX SICAV are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, BEKA LUX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with R Co and BEKA LUX

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

The idea behind R co Valor F and BEKA LUX SICAV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.