Correlation Between Covestro and Evonik Industries
Can any of the company-specific risk be diversified away by investing in both Covestro and Evonik Industries 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 Covestro and Evonik Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Covestro AG and Evonik Industries AG, you can compare the effects of market volatilities on Covestro and Evonik Industries 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 Covestro with a short position of Evonik Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covestro and Evonik Industries.
Diversification Opportunities for Covestro and Evonik Industries
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Covestro and Evonik is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Covestro AG and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries and Covestro 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 Covestro AG are associated (or correlated) with Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Covestro i.e., Covestro and Evonik Industries go up and down completely randomly.
Pair Corralation between Covestro and Evonik Industries
Assuming the 90 days horizon Covestro AG is expected to generate 0.69 times more return on investment than Evonik Industries. However, Covestro AG is 1.45 times less risky than Evonik Industries. It trades about 0.12 of its potential returns per unit of risk. Evonik Industries AG is currently generating about -0.13 per unit of risk. If you would invest 5,650 in Covestro AG on September 3, 2024 and sell it today you would earn a total of 715.00 from holding Covestro AG or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Covestro AG vs. Evonik Industries AG
Performance |
| Timeline |
| Covestro AG |
| Evonik Industries |
Covestro and Evonik Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Covestro and Evonik Industries
The main advantage of trading using opposite Covestro and Evonik Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covestro position performs unexpectedly, Evonik Industries 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 Evonik Industries will offset losses from the drop in Evonik Industries' long position.| Covestro vs. LAir Liquide SA | Covestro vs. Asia Carbon Industries | Covestro vs. Akzo Nobel NV | Covestro vs. Avoca LLC |
| Evonik Industries vs. Symrise Ag PK | Evonik Industries vs. Fuchs Petrolub SE | Evonik Industries vs. Innospec | Evonik Industries vs. Air Liquide SA |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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