Correlation Between Varta AG and Plug Power

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Can any of the company-specific risk be diversified away by investing in both Varta AG and Plug Power 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 Varta AG and Plug Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varta AG and Plug Power, you can compare the effects of market volatilities on Varta AG and Plug Power 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 Varta AG with a short position of Plug Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and Plug Power.

Diversification Opportunities for Varta AG and Plug Power

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Varta and Plug is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power and Varta 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 Varta AG are associated (or correlated) with Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Varta AG i.e., Varta AG and Plug Power go up and down completely randomly.

Pair Corralation between Varta AG and Plug Power

Assuming the 90 days trading horizon Varta AG is expected to under-perform the Plug Power. In addition to that, Varta AG is 1.52 times more volatile than Plug Power. It trades about -0.14 of its total potential returns per unit of risk. Plug Power is currently generating about 0.04 per unit of volatility. If you would invest  179.00  in Plug Power on November 6, 2024 and sell it today you would earn a total of  7.00  from holding Plug Power or generate 3.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Varta AG  vs.  Plug Power

 Performance 
       Timeline  
Varta AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Plug Power 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Plug Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Varta AG and Plug Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Varta AG and Plug Power

The main advantage of trading using opposite Varta AG and Plug Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, Plug Power 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 Plug Power will offset losses from the drop in Plug Power's long position.
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The idea behind Varta AG and Plug Power 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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