Correlation Between BEL Small and Celyad SA

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

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

Diversification Opportunities for BEL Small and Celyad SA

-0.9

Correlation Coefficient

BEL Small  Celyad SA

Pay attention - limited upside

The 3 months correlation between BEL and Celyad is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding BEL Small and Celyad SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celyad SA and BEL Small 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 BEL Small are associated (or correlated) with Celyad SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celyad SA has no effect on the direction of BEL Small i.e., BEL Small and Celyad SA go up and down completely randomly.

Pair Corralation between BEL Small and Celyad SA

Assuming the 90 days trading horizon BEL Small is expected to under-perform the Celyad SA. But the index apears to be less risky and, when comparing its historical volatility, BEL Small is 19.48 times less risky than Celyad SA. The index trades about -0.15 of its potential returns per unit of risk. The Celyad SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Celyad SA on September 19, 2024 and sell it today you would earn a total of  40.00  from holding Celyad SA or generate 129.03% return on investment over 90 days.

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

BEL Small  vs.  Celyad SA

Pair Trading with BEL Small and Celyad SA

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

The idea behind BEL Small and Celyad SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.