Can any of the company-specific risk be diversified away by investing in both Tetragon Financial and Vastned Retail 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 Tetragon Financial and Vastned Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetragon Financial Group and Vastned Retail NV, you can compare the effects of market volatilities on Tetragon Financial and Vastned Retail 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 Tetragon Financial with a short position of Vastned Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetragon Financial and Vastned Retail.
Diversification Opportunities for Tetragon Financial and Vastned Retail
The 3 months correlation between Tetragon and Vastned is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group and Vastned Retail NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vastned Retail NV and Tetragon Financial 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 Tetragon Financial Group are associated (or correlated) with Vastned Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vastned Retail NV has no effect on the direction of Tetragon Financial i.e., Tetragon Financial and Vastned Retail go up and down completely randomly.
Pair Corralation between Tetragon Financial and Vastned Retail
Assuming the 90 days trading horizon Tetragon Financial is expected to generate 3.45 times less return on investment than Vastned Retail. But when comparing it to its historical volatility, Tetragon Financial Group is 1.19 times less risky than Vastned Retail. It trades about 0.09 of its potential returns per unit of risk. Vastned Retail NV is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,009 in Vastned Retail NV on March 6, 2024 and sell it today you would earn a total of 431.00 from holding Vastned Retail NV or generate 21.45% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Tetragon Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Tetragon Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Vastned Retail NV are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vastned Retail sustained solid returns over the last few months and may actually be approaching a breakup point.