Correlation Between Sipef NV and Tessenderlo

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

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

Diversification Opportunities for Sipef NV and Tessenderlo

-0.19

Correlation Coefficient

Sipef NV  Tessenderlo

Good diversification

The 3 months correlation between Sipef and Tessenderlo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sipef NV and Tessenderlo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tessenderlo and Sipef NV 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 Sipef NV are associated (or correlated) with Tessenderlo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tessenderlo has no effect on the direction of Sipef NV i.e., Sipef NV and Tessenderlo go up and down completely randomly.

Pair Corralation between Sipef NV and Tessenderlo

Assuming the 90 days trading horizon Sipef NV is expected to generate 0.71 times more return on investment than Tessenderlo. However, Sipef NV is 1.42 times less risky than Tessenderlo. It trades about 0.04 of its potential returns per unit of risk. Tessenderlo is currently generating about -0.13 per unit of risk. If you would invest  5,560  in Sipef NV on August 31, 2024 and sell it today you would earn a total of  120.00  from holding Sipef NV or generate 2.16% return on investment over 90 days.

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

Sipef NV  vs.  Tessenderlo

Sipef NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sipef NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Sipef NV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tessenderlo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tessenderlo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Sipef NV and Tessenderlo

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

The idea behind Sipef NV and Tessenderlo 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.