Correlation Between BSR Real and European Residential

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Can any of the company-specific risk be diversified away by investing in both BSR Real and European Residential 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 BSR Real and European Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BSR Real Estate and European Residential Real, you can compare the effects of market volatilities on BSR Real and European Residential 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 BSR Real with a short position of European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of BSR Real and European Residential.

Diversification Opportunities for BSR Real and European Residential

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between BSR and European is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BSR Real Estate and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real and BSR Real 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 BSR Real Estate are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of BSR Real i.e., BSR Real and European Residential go up and down completely randomly.

Pair Corralation between BSR Real and European Residential

Assuming the 90 days trading horizon BSR Real Estate is expected to under-perform the European Residential. In addition to that, BSR Real is 1.08 times more volatile than European Residential Real. It trades about -0.23 of its total potential returns per unit of risk. European Residential Real is currently generating about 0.02 per unit of volatility. If you would invest  314.00  in European Residential Real on August 9, 2024 and sell it today you would earn a total of  1.00  from holding European Residential Real or generate 0.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BSR Real Estate  vs.  European Residential Real

 Performance 
       Timeline  
BSR Real Estate 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in BSR Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, BSR Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
European Residential Real 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

BSR Real and European Residential Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BSR Real and European Residential

The main advantage of trading using opposite BSR Real and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BSR Real position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.
The idea behind BSR Real Estate and European Residential Real 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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