Correlation Between Lear and Knorr-Bremse Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both Lear and Knorr-Bremse Aktiengesellscha 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 Lear and Knorr-Bremse Aktiengesellscha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lear Corporation and Knorr Bremse Aktiengesellschaft, you can compare the effects of market volatilities on Lear and Knorr-Bremse Aktiengesellscha 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 Lear with a short position of Knorr-Bremse Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and Knorr-Bremse Aktiengesellscha.
Diversification Opportunities for Lear and Knorr-Bremse Aktiengesellscha
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lear and Knorr-Bremse is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Knorr Bremse Aktiengesellschaf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knorr-Bremse Aktiengesellscha and Lear 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 Lear Corporation are associated (or correlated) with Knorr-Bremse Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knorr-Bremse Aktiengesellscha has no effect on the direction of Lear i.e., Lear and Knorr-Bremse Aktiengesellscha go up and down completely randomly.
Pair Corralation between Lear and Knorr-Bremse Aktiengesellscha
Considering the 90-day investment horizon Lear Corporation is expected to under-perform the Knorr-Bremse Aktiengesellscha. In addition to that, Lear is 1.05 times more volatile than Knorr Bremse Aktiengesellschaft. It trades about -0.05 of its total potential returns per unit of risk. Knorr Bremse Aktiengesellschaft is currently generating about 0.06 per unit of volatility. If you would invest 1,502 in Knorr Bremse Aktiengesellschaft on September 3, 2024 and sell it today you would earn a total of 384.00 from holding Knorr Bremse Aktiengesellschaft or generate 25.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lear Corp. vs. Knorr Bremse Aktiengesellschaf
Performance |
| Timeline |
| Lear |
| Knorr-Bremse Aktiengesellscha |
Lear and Knorr-Bremse Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lear and Knorr-Bremse Aktiengesellscha
The main advantage of trading using opposite Lear and Knorr-Bremse Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lear position performs unexpectedly, Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha will offset losses from the drop in Knorr-Bremse Aktiengesellscha's long position.The idea behind Lear Corporation and Knorr Bremse Aktiengesellschaft 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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