Correlation Between European Residential and RepliCel Life

Can any of the company-specific risk be diversified away by investing in both European Residential and RepliCel Life 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 RepliCel Life 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 RepliCel Life Sciences, you can compare the effects of market volatilities on European Residential and RepliCel Life 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 RepliCel Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and RepliCel Life.

Diversification Opportunities for European Residential and RepliCel Life

-0.72

Correlation Coefficient

European Residential  RepliCel Life

Pay attention - limited upside

The 3 months correlation between European and RepliCel is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and RepliCel Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RepliCel Life Sciences 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 RepliCel Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RepliCel Life Sciences has no effect on the direction of European Residential i.e., European Residential and RepliCel Life go up and down completely randomly.

Pair Corralation between European Residential and RepliCel Life

Assuming the 90 days trading horizon European Residential is expected to generate 2.43 times less return on investment than RepliCel Life. But when comparing it to its historical volatility, European Residential Real is 6.73 times less risky than RepliCel Life. It trades about 0.16 of its potential returns per unit of risk. RepliCel Life Sciences is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.00  in RepliCel Life Sciences on September 26, 2024 and sell it today you would earn a total of  0.00  from holding RepliCel Life Sciences or generate 0.0% return on investment over 90 days.

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

European Residential Real  vs.  RepliCel Life Sciences

European Residential Real

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 9 (%) 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.

RepliCel Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RepliCel Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with European Residential and RepliCel Life

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

The idea behind European Residential Real and RepliCel Life Sciences 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.