Correlation Between Fuchs Petrolub and Covestro ADR
Can any of the company-specific risk be diversified away by investing in both Fuchs Petrolub and Covestro ADR 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 Fuchs Petrolub and Covestro ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fuchs Petrolub SE and Covestro ADR, you can compare the effects of market volatilities on Fuchs Petrolub and Covestro ADR 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 Fuchs Petrolub with a short position of Covestro ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuchs Petrolub and Covestro ADR.
Diversification Opportunities for Fuchs Petrolub and Covestro ADR
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fuchs and Covestro is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fuchs Petrolub SE and Covestro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro ADR and Fuchs Petrolub 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 Fuchs Petrolub SE are associated (or correlated) with Covestro ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro ADR has no effect on the direction of Fuchs Petrolub i.e., Fuchs Petrolub and Covestro ADR go up and down completely randomly.
Pair Corralation between Fuchs Petrolub and Covestro ADR
Assuming the 90 days horizon Fuchs Petrolub SE is expected to generate 1.87 times more return on investment than Covestro ADR. However, Fuchs Petrolub is 1.87 times more volatile than Covestro ADR. It trades about 0.01 of its potential returns per unit of risk. Covestro ADR is currently generating about -0.24 per unit of risk. If you would invest 1,131 in Fuchs Petrolub SE on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Fuchs Petrolub SE or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fuchs Petrolub SE vs. Covestro ADR
Performance |
| Timeline |
| Fuchs Petrolub SE |
| Covestro ADR |
Fuchs Petrolub and Covestro ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fuchs Petrolub and Covestro ADR
The main advantage of trading using opposite Fuchs Petrolub and Covestro ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuchs Petrolub position performs unexpectedly, Covestro ADR 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 Covestro ADR will offset losses from the drop in Covestro ADR's long position.| Fuchs Petrolub vs. First Graphene | Fuchs Petrolub vs. HUMANA INC | Fuchs Petrolub vs. Aquagold International | Fuchs Petrolub vs. Barloworld Ltd ADR |
| Covestro ADR vs. First Graphene | Covestro ADR vs. HUMANA INC | Covestro ADR vs. Aquagold International | Covestro ADR vs. Barloworld Ltd ADR |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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