Correlation Between Vestas Wind and Deutz AG

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

Diversification Opportunities for Vestas Wind and Deutz AG

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vestas and Deutz is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Deutz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutz AG and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Deutz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutz AG has no effect on the direction of Vestas Wind i.e., Vestas Wind and Deutz AG go up and down completely randomly.

Pair Corralation between Vestas Wind and Deutz AG

Assuming the 90 days trading horizon Vestas Wind is expected to generate 17.87 times less return on investment than Deutz AG. In addition to that, Vestas Wind is 2.87 times more volatile than Deutz AG. It trades about 0.0 of its total potential returns per unit of risk. Deutz AG is currently generating about 0.17 per unit of volatility. If you would invest  400.00  in Deutz AG on September 13, 2024 and sell it today you would earn a total of  16.00  from holding Deutz AG or generate 4.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Vestas Wind Systems  vs.  Deutz AG

 Performance 
       Timeline  
Vestas Wind Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Deutz AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Deutz AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Vestas Wind and Deutz AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vestas Wind and Deutz AG

The main advantage of trading using opposite Vestas Wind and Deutz AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Deutz AG 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 Deutz AG will offset losses from the drop in Deutz AG's long position.
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The idea behind Vestas Wind Systems and Deutz AG 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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