Correlation Between European Residential and Hawkeye Gold

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

By analyzing existing cross correlation between European Residential Real and Hawkeye Gold and, you can compare the effects of market volatilities on European Residential and Hawkeye Gold 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 European Residential with a short position of Hawkeye Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Hawkeye Gold.

Diversification Opportunities for European Residential and Hawkeye Gold

-0.44

Correlation Coefficient

European Residential  Hawkeye Gold

Very good diversification

The 3 months correlation between European and Hawkeye is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Hawkeye Gold and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkeye Gold and European Residential 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 European Residential Real are associated (or correlated) with Hawkeye Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkeye Gold has no effect on the direction of European Residential i.e., European Residential and Hawkeye Gold go up and down completely randomly.

Pair Corralation between European Residential and Hawkeye Gold

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.28 times more return on investment than Hawkeye Gold. However, European Residential Real is 3.62 times less risky than Hawkeye Gold. It trades about 0.22 of its potential returns per unit of risk. Hawkeye Gold and is currently generating about 0.04 per unit of risk. If you would invest  272.00  in European Residential Real on September 5, 2024 and sell it today you would earn a total of  103.00  from holding European Residential Real or generate 37.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

European Residential Real  vs.  Hawkeye Gold and

European Residential Real

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Hawkeye Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkeye Gold and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Hawkeye Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Residential and Hawkeye Gold

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

The idea behind European Residential Real and Hawkeye Gold and 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.