Correlation Between EnviTec Biogas and CHUGOKU EL
Can any of the company-specific risk be diversified away by investing in both EnviTec Biogas and CHUGOKU EL 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 EnviTec Biogas and CHUGOKU EL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EnviTec Biogas AG and CHUGOKU EL PWR, you can compare the effects of market volatilities on EnviTec Biogas and CHUGOKU EL 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 EnviTec Biogas with a short position of CHUGOKU EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnviTec Biogas and CHUGOKU EL.
Diversification Opportunities for EnviTec Biogas and CHUGOKU EL
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between EnviTec and CHUGOKU is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding EnviTec Biogas AG and CHUGOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUGOKU EL PWR and EnviTec Biogas 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 EnviTec Biogas AG are associated (or correlated) with CHUGOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUGOKU EL PWR has no effect on the direction of EnviTec Biogas i.e., EnviTec Biogas and CHUGOKU EL go up and down completely randomly.
Pair Corralation between EnviTec Biogas and CHUGOKU EL
Assuming the 90 days horizon EnviTec Biogas AG is expected to generate 0.91 times more return on investment than CHUGOKU EL. However, EnviTec Biogas AG is 1.1 times less risky than CHUGOKU EL. It trades about 0.03 of its potential returns per unit of risk. CHUGOKU EL PWR is currently generating about -0.27 per unit of risk. If you would invest 3,070 in EnviTec Biogas AG on September 12, 2024 and sell it today you would earn a total of 30.00 from holding EnviTec Biogas AG or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
EnviTec Biogas AG vs. CHUGOKU EL PWR
Performance |
| Timeline |
| EnviTec Biogas AG |
| CHUGOKU EL PWR |
EnviTec Biogas and CHUGOKU EL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EnviTec Biogas and CHUGOKU EL
The main advantage of trading using opposite EnviTec Biogas and CHUGOKU EL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnviTec Biogas position performs unexpectedly, CHUGOKU EL 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 CHUGOKU EL will offset losses from the drop in CHUGOKU EL's long position.The idea behind EnviTec Biogas AG and CHUGOKU EL PWR 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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