Correlation Between CVC Capital and Galapagos

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

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

Diversification Opportunities for CVC Capital and Galapagos

-0.33

Correlation Coefficient

CVC Capital  Galapagos

Very good diversification

The 3 months correlation between CVC and Galapagos is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding CVC Capital Partners and Galapagos NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV and CVC Capital 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 CVC Capital Partners are associated (or correlated) with Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV has no effect on the direction of CVC Capital i.e., CVC Capital and Galapagos go up and down completely randomly.

Pair Corralation between CVC Capital and Galapagos

Assuming the 90 days trading horizon CVC Capital Partners is expected to generate 1.15 times more return on investment than Galapagos. However, CVC Capital is 1.15 times more volatile than Galapagos NV. It trades about 0.04 of its potential returns per unit of risk. Galapagos NV is currently generating about 0.0 per unit of risk. If you would invest  2,143  in CVC Capital Partners on September 19, 2024 and sell it today you would earn a total of  37.00  from holding CVC Capital Partners or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

CVC Capital Partners  vs.  Galapagos NV

CVC Capital Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Capital Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, CVC Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Galapagos NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CVC Capital and Galapagos

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

The idea behind CVC Capital Partners and Galapagos 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.