Correlation Between Euronext and Moodys

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

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

Diversification Opportunities for Euronext and Moodys

0.11

Correlation Coefficient

Euronext  Moodys

Average diversification

The 3 months correlation between Euronext and Moodys is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys and Euronext 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 Euronext NV are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Euronext i.e., Euronext and Moodys go up and down completely randomly.

Pair Corralation between Euronext and Moodys

Assuming the 90 days horizon Euronext NV is expected to generate 0.81 times more return on investment than Moodys. However, Euronext NV is 1.24 times less risky than Moodys. It trades about 0.07 of its potential returns per unit of risk. Moodys is currently generating about -0.02 per unit of risk. If you would invest  10,960  in Euronext NV on September 21, 2024 and sell it today you would earn a total of  450.00  from holding Euronext NV or generate 4.11% return on investment over 90 days.

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

Euronext NV  vs.  Moodys

Euronext NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Euronext NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Euronext is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Euronext and Moodys

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

The idea behind Euronext NV and Moodys 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.