Correlation Between NN Group and Eurocastle Investment

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

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

Diversification Opportunities for NN Group and Eurocastle Investment

0.68

Correlation Coefficient

NN Group  Eurocastle Investment

Poor diversification

The 3 months correlation between NN Group and Eurocastle is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NN Group NV and Eurocastle Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocastle Investment and NN Group 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 NN Group NV are associated (or correlated) with Eurocastle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocastle Investment has no effect on the direction of NN Group i.e., NN Group and Eurocastle Investment go up and down completely randomly.

Pair Corralation between NN Group and Eurocastle Investment

Assuming the 90 days horizon NN Group is expected to generate 1.98 times less return on investment than Eurocastle Investment. But when comparing it to its historical volatility, NN Group NV is 1.97 times less risky than Eurocastle Investment. It trades about 0.19 of its potential returns per unit of risk. Eurocastle Investment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Eurocastle Investment on January 30, 2025 and sell it today you would earn a total of  125.00  from holding Eurocastle Investment or generate 16.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	41.94%
Values	Daily Returns

NN Group NV  vs.  Eurocastle Investment

NN Group NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NN Group NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NN Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Eurocastle Investment

Risk-Adjusted Performance

Good

Over the last 90 days Eurocastle Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Eurocastle Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NN Group and Eurocastle Investment

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

The idea behind NN Group NV and Eurocastle Investment 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 Correlations module to find global opportunities by holding instruments from different markets.