Correlation Between Knorr-Bremse Aktiengesellscha and Seek
Can any of the company-specific risk be diversified away by investing in both Knorr-Bremse Aktiengesellscha and Seek 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 Knorr-Bremse Aktiengesellscha and Seek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knorr Bremse Aktiengesellschaft and Seek Ltd ADR, you can compare the effects of market volatilities on Knorr-Bremse Aktiengesellscha and Seek 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 Knorr-Bremse Aktiengesellscha with a short position of Seek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knorr-Bremse Aktiengesellscha and Seek.
Diversification Opportunities for Knorr-Bremse Aktiengesellscha and Seek
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Knorr-Bremse and Seek is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Knorr Bremse Aktiengesellschaf and Seek Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seek Ltd ADR and Knorr-Bremse Aktiengesellscha 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 Knorr Bremse Aktiengesellschaft are associated (or correlated) with Seek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seek Ltd ADR has no effect on the direction of Knorr-Bremse Aktiengesellscha i.e., Knorr-Bremse Aktiengesellscha and Seek go up and down completely randomly.
Pair Corralation between Knorr-Bremse Aktiengesellscha and Seek
Assuming the 90 days horizon Knorr Bremse Aktiengesellschaft is expected to under-perform the Seek. But the pink sheet apears to be less risky and, when comparing its historical volatility, Knorr Bremse Aktiengesellschaft is 1.08 times less risky than Seek. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Seek Ltd ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,254 in Seek Ltd ADR on September 2, 2024 and sell it today you would earn a total of 138.00 from holding Seek Ltd ADR or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knorr Bremse Aktiengesellschaf vs. Seek Ltd ADR
Performance |
| Timeline |
| Knorr-Bremse Aktiengesellscha |
| Seek Ltd ADR |
Knorr-Bremse Aktiengesellscha and Seek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knorr-Bremse Aktiengesellscha and Seek
The main advantage of trading using opposite Knorr-Bremse Aktiengesellscha and Seek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knorr-Bremse Aktiengesellscha position performs unexpectedly, Seek 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 Seek will offset losses from the drop in Seek's long position.The idea behind Knorr Bremse Aktiengesellschaft and Seek Ltd ADR 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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