Correlation Between Verbund AG and Kansai Electric
Can any of the company-specific risk be diversified away by investing in both Verbund AG and Kansai Electric 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 Verbund AG and Kansai Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verbund AG ADR and Kansai Electric Power, you can compare the effects of market volatilities on Verbund AG and Kansai Electric 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 Verbund AG with a short position of Kansai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verbund AG and Kansai Electric.
Diversification Opportunities for Verbund AG and Kansai Electric
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Verbund and Kansai is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Verbund AG ADR and Kansai Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansai Electric Power and Verbund AG 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 Verbund AG ADR are associated (or correlated) with Kansai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansai Electric Power has no effect on the direction of Verbund AG i.e., Verbund AG and Kansai Electric go up and down completely randomly.
Pair Corralation between Verbund AG and Kansai Electric
Assuming the 90 days horizon Verbund AG ADR is expected to generate 0.55 times more return on investment than Kansai Electric. However, Verbund AG ADR is 1.82 times less risky than Kansai Electric. It trades about 0.08 of its potential returns per unit of risk. Kansai Electric Power is currently generating about 0.02 per unit of risk. If you would invest 1,519 in Verbund AG ADR on October 25, 2024 and sell it today you would earn a total of 62.00 from holding Verbund AG ADR or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verbund AG ADR vs. Kansai Electric Power
Performance |
| Timeline |
| Verbund AG ADR |
| Kansai Electric Power |
Verbund AG and Kansai Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verbund AG and Kansai Electric
The main advantage of trading using opposite Verbund AG and Kansai Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verbund AG position performs unexpectedly, Kansai Electric 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 Kansai Electric will offset losses from the drop in Kansai Electric's long position.| Verbund AG vs. Alternus Energy Group | Verbund AG vs. First National Energy | Verbund AG vs. Tokyo Electric Power | Verbund AG vs. Clearway Energy Class |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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