Correlation Between Aumann AG and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Aumann AG and Vestas Wind 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 Aumann AG and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aumann AG and Vestas Wind Systems, you can compare the effects of market volatilities on Aumann AG and Vestas Wind 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 Aumann AG with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aumann AG and Vestas Wind.
Diversification Opportunities for Aumann AG and Vestas Wind
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aumann and Vestas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aumann AG and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and Aumann AG 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 Aumann AG are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Aumann AG i.e., Aumann AG and Vestas Wind go up and down completely randomly.
Pair Corralation between Aumann AG and Vestas Wind
Assuming the 90 days horizon Aumann AG is expected to generate 1.15 times more return on investment than Vestas Wind. However, Aumann AG is 1.15 times more volatile than Vestas Wind Systems. It trades about 0.01 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.04 per unit of risk. If you would invest 1,400 in Aumann AG on August 29, 2024 and sell it today you would lose (100.00) from holding Aumann AG or give up 7.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 62.7% |
| Values | Daily Returns |
Aumann AG vs. Vestas Wind Systems
Performance |
| Timeline |
| Aumann AG |
| Vestas Wind Systems |
Aumann AG and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aumann AG and Vestas Wind
The main advantage of trading using opposite Aumann AG and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aumann AG position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Aumann AG vs. Parker Hannifin | Aumann AG vs. Eaton PLC | Aumann AG vs. Dover | Aumann AG vs. Illinois Tool Works |
| Vestas Wind vs. Parker Hannifin | Vestas Wind vs. Eaton PLC | Vestas Wind vs. Dover | Vestas Wind vs. Illinois Tool Works |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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