Correlation Between Sparinvest SICAV and Sparinvest INDEX

Can any of the company-specific risk be diversified away by investing in both Sparinvest SICAV 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 SICAV 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 SICAV Procedo and Sparinvest INDEX Europa, you can compare the effects of market volatilities on Sparinvest SICAV 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 SICAV with a short position of Sparinvest INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest SICAV and Sparinvest INDEX.

Diversification Opportunities for Sparinvest SICAV and Sparinvest INDEX

-0.08

Correlation Coefficient

Sparinvest SICAV  Sparinvest INDEX

Good diversification

The 3 months correlation between Sparinvest and Sparinvest is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest SICAV Procedo and Sparinvest INDEX Europa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Europa and Sparinvest SICAV 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 SICAV Procedo 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 Europa has no effect on the direction of Sparinvest SICAV i.e., Sparinvest SICAV and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between Sparinvest SICAV and Sparinvest INDEX

Assuming the 90 days trading horizon Sparinvest SICAV Procedo is expected to generate 0.79 times more return on investment than Sparinvest INDEX. However, Sparinvest SICAV Procedo is 1.27 times less risky than Sparinvest INDEX. It trades about 0.2 of its potential returns per unit of risk. Sparinvest INDEX Europa is currently generating about 0.03 per unit of risk. If you would invest  25,580  in Sparinvest SICAV Procedo on September 13, 2024 and sell it today you would earn a total of  1,580  from holding Sparinvest SICAV Procedo or generate 6.18% return on investment over 90 days.

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

Sparinvest SICAV Procedo  vs.  Sparinvest INDEX Europa

Sparinvest SICAV Procedo

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest SICAV Procedo are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable technical and fundamental indicators, Sparinvest SICAV is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Sparinvest INDEX Europa

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Europa are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sparinvest SICAV and Sparinvest INDEX

The main advantage of trading using opposite Sparinvest SICAV and Sparinvest INDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparinvest SICAV 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 SICAV Procedo and Sparinvest INDEX Europa 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.