Correlation Between Sparinvest Europa and Sparinvest INDEX

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

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

Diversification Opportunities for Sparinvest Europa and Sparinvest INDEX

-0.41

Correlation Coefficient

Sparinvest Europa  Sparinvest INDEX

Very good diversification

The 3 months correlation between Sparinvest and Sparinvest is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest Europa Growth and Sparinvest INDEX Globale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Globale and Sparinvest Europa 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 Sparinvest Europa Growth are associated (or correlated) with Sparinvest INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest INDEX Globale has no effect on the direction of Sparinvest Europa i.e., Sparinvest Europa and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between Sparinvest Europa and Sparinvest INDEX

Assuming the 90 days trading horizon Sparinvest Europa Growth is expected to under-perform the Sparinvest INDEX. In addition to that, Sparinvest Europa is 1.41 times more volatile than Sparinvest INDEX Globale. It trades about -0.02 of its total potential returns per unit of risk. Sparinvest INDEX Globale is currently generating about 0.18 per unit of volatility. If you would invest  14,367  in Sparinvest INDEX Globale on September 4, 2024 and sell it today you would earn a total of  1,063  from holding Sparinvest INDEX Globale or generate 7.4% return on investment over 90 days.

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

Sparinvest Europa Growth  vs.  Sparinvest INDEX Globale

Sparinvest Europa Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparinvest Europa Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent basic indicators, Sparinvest Europa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sparinvest INDEX Globale

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, Sparinvest INDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparinvest Europa and Sparinvest INDEX

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

The idea behind Sparinvest Europa Growth and Sparinvest INDEX Globale 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.