Correlation Between CBRE Group and Vonovia SE

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

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

Diversification Opportunities for CBRE Group and Vonovia SE

-0.72

Correlation Coefficient

CBRE Group  Vonovia SE

Pay attention - limited upside

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

Pair Corralation between CBRE Group and Vonovia SE

Assuming the 90 days horizon CBRE Group Class is expected to generate 1.36 times more return on investment than Vonovia SE. However, CBRE Group is 1.36 times more volatile than Vonovia SE. It trades about 0.18 of its potential returns per unit of risk. Vonovia SE is currently generating about 0.18 per unit of risk. If you would invest  11,900  in CBRE Group Class on September 5, 2024 and sell it today you would earn a total of  1,000.00  from holding CBRE Group Class or generate 8.4% return on investment over 90 days.

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

CBRE Group Class  vs.  Vonovia SE

CBRE Group Class

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CBRE Group Class are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CBRE Group reported solid returns over the last few months and may actually be approaching a breakup point.

Vonovia SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vonovia SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CBRE Group and Vonovia SE

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

The idea behind CBRE Group Class and Vonovia SE 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.