Correlation Between Koninklijke BAM and Fugro NV

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

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

Diversification Opportunities for Koninklijke BAM and Fugro NV

0.25

Correlation Coefficient

Koninklijke BAM  Fugro NV

Modest diversification

The 3 months correlation between Koninklijke and Fugro is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke BAM Groep and Fugro NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fugro NV and Koninklijke BAM 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 Koninklijke BAM Groep are associated (or correlated) with Fugro NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fugro NV has no effect on the direction of Koninklijke BAM i.e., Koninklijke BAM and Fugro NV go up and down completely randomly.

Pair Corralation between Koninklijke BAM and Fugro NV

Assuming the 90 days trading horizon Koninklijke BAM Groep is expected to generate 0.67 times more return on investment than Fugro NV. However, Koninklijke BAM Groep is 1.49 times less risky than Fugro NV. It trades about 0.12 of its potential returns per unit of risk. Fugro NV is currently generating about -0.1 per unit of risk. If you would invest  360.00  in Koninklijke BAM Groep on September 13, 2024 and sell it today you would earn a total of  50.00  from holding Koninklijke BAM Groep or generate 13.89% return on investment over 90 days.

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

Koninklijke BAM Groep  vs.  Fugro NV

Koninklijke BAM Groep

Risk-Adjusted Performance

9 of 100

OK

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

Fugro NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fugro NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Koninklijke BAM and Fugro NV

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

The idea behind Koninklijke BAM Groep and Fugro 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.