Correlation Between Derwent London and Thyssenkrupp
Can any of the company-specific risk be diversified away by investing in both Derwent London and Thyssenkrupp 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 Derwent London and Thyssenkrupp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derwent London PLC and Thyssenkrupp AG ON, you can compare the effects of market volatilities on Derwent London and Thyssenkrupp 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 Derwent London with a short position of Thyssenkrupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and Thyssenkrupp.
Diversification Opportunities for Derwent London and Thyssenkrupp
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Derwent and Thyssenkrupp is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and Thyssenkrupp AG ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thyssenkrupp AG ON and Derwent London 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 Derwent London PLC are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thyssenkrupp AG ON has no effect on the direction of Derwent London i.e., Derwent London and Thyssenkrupp go up and down completely randomly.
Pair Corralation between Derwent London and Thyssenkrupp
Assuming the 90 days trading horizon Derwent London PLC is expected to generate 0.48 times more return on investment than Thyssenkrupp. However, Derwent London PLC is 2.08 times less risky than Thyssenkrupp. It trades about -0.04 of its potential returns per unit of risk. Thyssenkrupp AG ON is currently generating about -0.03 per unit of risk. If you would invest 230,576 in Derwent London PLC on September 2, 2024 and sell it today you would lose (19,176) from holding Derwent London PLC or give up 8.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derwent London PLC vs. Thyssenkrupp AG ON
Performance |
| Timeline |
| Derwent London PLC |
| Thyssenkrupp AG ON |
Derwent London and Thyssenkrupp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derwent London and Thyssenkrupp
The main advantage of trading using opposite Derwent London and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derwent London position performs unexpectedly, Thyssenkrupp 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 Thyssenkrupp will offset losses from the drop in Thyssenkrupp's long position.| Derwent London vs. Baker Steel Resources | Derwent London vs. United States Steel | Derwent London vs. Foresight Environmental Infrastructure | Derwent London vs. JLEN Environmental Assets |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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