Correlation Between Varta AG and Companhia
Can any of the company-specific risk be diversified away by investing in both Varta AG and Companhia 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 Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varta AG and Companhia de Saneamento, you can compare the effects of market volatilities on Varta AG and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and Companhia.
Diversification Opportunities for Varta AG and Companhia
Very good diversification
The 3 months correlation between Varta and Companhia is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Varta AG i.e., Varta AG and Companhia go up and down completely randomly.
Pair Corralation between Varta AG and Companhia
Assuming the 90 days trading horizon Varta AG is expected to under-perform the Companhia. In addition to that, Varta AG is 4.27 times more volatile than Companhia de Saneamento. It trades about -0.01 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.06 per unit of volatility. If you would invest 1,015 in Companhia de Saneamento on August 25, 2024 and sell it today you would earn a total of 605.00 from holding Companhia de Saneamento or generate 59.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Varta AG vs. Companhia de Saneamento
Performance |
| Timeline |
| Varta AG |
| Companhia de Saneamento |
Varta AG and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varta AG and Companhia
The main advantage of trading using opposite Varta AG and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| Varta AG vs. REVO INSURANCE SPA | Varta AG vs. ZURICH INSURANCE GROUP | Varta AG vs. The Hanover Insurance | Varta AG vs. CapitaLand Investment Limited |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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