Correlation Between FL Entertainment and Vastned Retail

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

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

Diversification Opportunities for FL Entertainment and Vastned Retail

0.76

Correlation Coefficient

FL Entertainment  Vastned Retail

Poor diversification

The 3 months correlation between FLE and Vastned is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding FL Entertainment NV 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 FL Entertainment 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 FL Entertainment NV 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 FL Entertainment i.e., FL Entertainment and Vastned Retail go up and down completely randomly.

Pair Corralation between FL Entertainment and Vastned Retail

Assuming the 90 days trading horizon FL Entertainment NV is expected to under-perform the Vastned Retail. But the stock apears to be less risky and, when comparing its historical volatility, FL Entertainment NV is 2.78 times less risky than Vastned Retail. The stock trades about -0.06 of its potential returns per unit of risk. The Vastned Retail NV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,240  in Vastned Retail NV on January 30, 2024 and sell it today you would earn a total of  15.00  from holding Vastned Retail NV or generate 0.67% return on investment over 90 days.

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

FL Entertainment NV  vs.  Vastned Retail NV

FL Entertainment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FL Entertainment NV are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, FL Entertainment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Vastned Retail NV

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vastned Retail NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Vastned Retail may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with FL Entertainment and Vastned Retail

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

The idea behind FL Entertainment NV and Vastned Retail NV 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.