Correlation Between Liechtensteinische and EMS CHEMIE
Can any of the company-specific risk be diversified away by investing in both Liechtensteinische and EMS CHEMIE 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 Liechtensteinische and EMS CHEMIE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liechtensteinische Landesbank AG and EMS CHEMIE HOLDING AG, you can compare the effects of market volatilities on Liechtensteinische and EMS CHEMIE 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 Liechtensteinische with a short position of EMS CHEMIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liechtensteinische and EMS CHEMIE.
Diversification Opportunities for Liechtensteinische and EMS CHEMIE
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liechtensteinische and EMS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Liechtensteinische Landesbank and EMS CHEMIE HOLDING AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMS CHEMIE HOLDING and Liechtensteinische 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 Liechtensteinische Landesbank AG are associated (or correlated) with EMS CHEMIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMS CHEMIE HOLDING has no effect on the direction of Liechtensteinische i.e., Liechtensteinische and EMS CHEMIE go up and down completely randomly.
Pair Corralation between Liechtensteinische and EMS CHEMIE
Assuming the 90 days trading horizon Liechtensteinische Landesbank AG is expected to generate 0.88 times more return on investment than EMS CHEMIE. However, Liechtensteinische Landesbank AG is 1.14 times less risky than EMS CHEMIE. It trades about 0.05 of its potential returns per unit of risk. EMS CHEMIE HOLDING AG is currently generating about 0.02 per unit of risk. If you would invest 6,055 in Liechtensteinische Landesbank AG on September 1, 2024 and sell it today you would earn a total of 815.00 from holding Liechtensteinische Landesbank AG or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liechtensteinische Landesbank vs. EMS CHEMIE HOLDING AG
Performance |
| Timeline |
| Liechtensteinische |
| EMS CHEMIE HOLDING |
Liechtensteinische and EMS CHEMIE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liechtensteinische and EMS CHEMIE
The main advantage of trading using opposite Liechtensteinische and EMS CHEMIE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liechtensteinische position performs unexpectedly, EMS CHEMIE 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 EMS CHEMIE will offset losses from the drop in EMS CHEMIE's long position.| Liechtensteinische vs. VP Bank AG | Liechtensteinische vs. Valiant Holding AG | Liechtensteinische vs. Glarner Kantonalbank | Liechtensteinische vs. Berner Kantonalbank AG |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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