Correlation Between Varta AG and XAAR PLC
Can any of the company-specific risk be diversified away by investing in both Varta AG and XAAR PLC 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 XAAR PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varta AG and XAAR PLC LS 10, you can compare the effects of market volatilities on Varta AG and XAAR PLC 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 XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and XAAR PLC.
Diversification Opportunities for Varta AG and XAAR PLC
Very good diversification
The 3 months correlation between Varta and XAAR is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS 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 XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of Varta AG i.e., Varta AG and XAAR PLC go up and down completely randomly.
Pair Corralation between Varta AG and XAAR PLC
Assuming the 90 days trading horizon Varta AG is expected to under-perform the XAAR PLC. In addition to that, Varta AG is 1.92 times more volatile than XAAR PLC LS 10. It trades about -0.37 of its total potential returns per unit of risk. XAAR PLC LS 10 is currently generating about -0.25 per unit of volatility. If you would invest 98.00 in XAAR PLC LS 10 on September 1, 2024 and sell it today you would lose (16.00) from holding XAAR PLC LS 10 or give up 16.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Varta AG vs. XAAR PLC LS 10
Performance |
| Timeline |
| Varta AG |
| XAAR PLC LS |
Varta AG and XAAR PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varta AG and XAAR PLC
The main advantage of trading using opposite Varta AG and XAAR PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, XAAR PLC 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 XAAR PLC will offset losses from the drop in XAAR PLC's long position.| Varta AG vs. Cogent Communications Holdings | Varta AG vs. Scandinavian Tobacco Group | Varta AG vs. IMPERIAL TOBACCO | Varta AG vs. American Airlines Group |
| XAAR PLC vs. Live Nation Entertainment | XAAR PLC vs. Seven West Media | XAAR PLC vs. Martin Marietta Materials | XAAR PLC vs. Playtech plc |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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