Correlation Between Weir Group and Heidelberger Druckmaschinen
Can any of the company-specific risk be diversified away by investing in both Weir Group and Heidelberger Druckmaschinen 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 Weir Group and Heidelberger Druckmaschinen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weir Group PLC and Heidelberger Druckmaschinen AG, you can compare the effects of market volatilities on Weir Group and Heidelberger Druckmaschinen 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 Weir Group with a short position of Heidelberger Druckmaschinen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weir Group and Heidelberger Druckmaschinen.
Diversification Opportunities for Weir Group and Heidelberger Druckmaschinen
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Weir and Heidelberger is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Heidelberger Druckmaschinen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberger Druckmaschinen and Weir Group 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 Weir Group PLC are associated (or correlated) with Heidelberger Druckmaschinen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberger Druckmaschinen has no effect on the direction of Weir Group i.e., Weir Group and Heidelberger Druckmaschinen go up and down completely randomly.
Pair Corralation between Weir Group and Heidelberger Druckmaschinen
Assuming the 90 days horizon Weir Group is expected to generate 1.05 times less return on investment than Heidelberger Druckmaschinen. But when comparing it to its historical volatility, Weir Group PLC is 3.15 times less risky than Heidelberger Druckmaschinen. It trades about 0.08 of its potential returns per unit of risk. Heidelberger Druckmaschinen AG is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 55.00 in Heidelberger Druckmaschinen AG on November 3, 2024 and sell it today you would lose (1.00) from holding Heidelberger Druckmaschinen AG or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weir Group PLC vs. Heidelberger Druckmaschinen AG
Performance |
| Timeline |
| Weir Group PLC |
| Heidelberger Druckmaschinen |
Weir Group and Heidelberger Druckmaschinen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weir Group and Heidelberger Druckmaschinen
The main advantage of trading using opposite Weir Group and Heidelberger Druckmaschinen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weir Group position performs unexpectedly, Heidelberger Druckmaschinen 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 Heidelberger Druckmaschinen will offset losses from the drop in Heidelberger Druckmaschinen's long position.| Weir Group vs. Greenshift Corp | Weir Group vs. Next Hydrogen Solutions | Weir Group vs. Quality Industrial Corp | Weir Group vs. Titan Logix Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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