Correlation Between American States and Gelsenwasser
Can any of the company-specific risk be diversified away by investing in both American States and Gelsenwasser 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 American States and Gelsenwasser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American States Water and Gelsenwasser AG, you can compare the effects of market volatilities on American States and Gelsenwasser 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 American States with a short position of Gelsenwasser. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Gelsenwasser.
Diversification Opportunities for American States and Gelsenwasser
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Gelsenwasser is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Gelsenwasser AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gelsenwasser AG and American States 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 American States Water are associated (or correlated) with Gelsenwasser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gelsenwasser AG has no effect on the direction of American States i.e., American States and Gelsenwasser go up and down completely randomly.
Pair Corralation between American States and Gelsenwasser
Assuming the 90 days horizon American States Water is expected to generate 0.47 times more return on investment than Gelsenwasser. However, American States Water is 2.13 times less risky than Gelsenwasser. It trades about -0.01 of its potential returns per unit of risk. Gelsenwasser AG is currently generating about -0.02 per unit of risk. If you would invest 8,721 in American States Water on August 26, 2024 and sell it today you would lose (761.00) from holding American States Water or give up 8.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American States Water vs. Gelsenwasser AG
Performance |
| Timeline |
| American States Water |
| Gelsenwasser AG |
American States and Gelsenwasser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American States and Gelsenwasser
The main advantage of trading using opposite American States and Gelsenwasser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States position performs unexpectedly, Gelsenwasser 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 Gelsenwasser will offset losses from the drop in Gelsenwasser's long position.| American States vs. MEDICAL FACILITIES NEW | American States vs. Public Storage | American States vs. SBM OFFSHORE | American States vs. DATAGROUP SE |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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