Correlation Between Dynamic Active and European Residential

Can any of the company-specific risk be diversified away by investing in both Dynamic Active 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 Dynamic Active and European Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynamic Active Canadian and European Residential Real, you can compare the effects of market volatilities on Dynamic Active 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 Dynamic Active with a short position of European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and European Residential.

Diversification Opportunities for Dynamic Active and European Residential

0.33

Correlation Coefficient

Dynamic Active  European Residential

Weak diversification

The 3 months correlation between Dynamic and European is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Canadian 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 Dynamic Active 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 Dynamic Active Canadian 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 Dynamic Active i.e., Dynamic Active and European Residential go up and down completely randomly.

Pair Corralation between Dynamic Active and European Residential

Assuming the 90 days trading horizon Dynamic Active Canadian is expected to generate 0.4 times more return on investment than European Residential. However, Dynamic Active Canadian is 2.47 times less risky than European Residential. It trades about 0.35 of its potential returns per unit of risk. European Residential Real is currently generating about 0.06 per unit of risk. If you would invest  3,693  in Dynamic Active Canadian on April 23, 2025 and sell it today you would earn a total of  339.00  from holding Dynamic Active Canadian or generate 9.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Dynamic Active Canadian  vs.  European Residential Real

Dynamic Active Canadian

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Canadian are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

European Residential Real

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, European Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dynamic Active and European Residential

The main advantage of trading using opposite Dynamic Active and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active 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 Dynamic Active Canadian 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.