Correlation Between Materialise and Gelsenwasser

Can any of the company-specific risk be diversified away by investing in both Materialise and Gelsenwasser 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 Materialise and Gelsenwasser into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materialise NV and Gelsenwasser AG, you can compare the effects of market volatilities on Materialise and Gelsenwasser 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 Materialise with a short position of Gelsenwasser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and Gelsenwasser.

Diversification Opportunities for Materialise and Gelsenwasser

0.09

Correlation Coefficient

Materialise  Gelsenwasser

Significant diversification

The 3 months correlation between Materialise and Gelsenwasser is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Gelsenwasser AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gelsenwasser AG and Materialise 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 Materialise NV are associated (or correlated) with Gelsenwasser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gelsenwasser AG has no effect on the direction of Materialise i.e., Materialise and Gelsenwasser go up and down completely randomly.

Pair Corralation between Materialise and Gelsenwasser

Assuming the 90 days trading horizon Materialise NV is expected to generate 1.6 times more return on investment than Gelsenwasser. However, Materialise is 1.6 times more volatile than Gelsenwasser AG. It trades about 0.15 of its potential returns per unit of risk. Gelsenwasser AG is currently generating about 0.01 per unit of risk. If you would invest  545.00  in Materialise NV on October 25, 2024 and sell it today you would earn a total of  205.00  from holding Materialise NV or generate 37.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Materialise NV  vs.  Gelsenwasser AG

Materialise NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gelsenwasser AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gelsenwasser AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gelsenwasser is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Materialise and Gelsenwasser

The main advantage of trading using opposite Materialise and Gelsenwasser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise position performs unexpectedly, Gelsenwasser 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 Gelsenwasser will offset losses from the drop in Gelsenwasser's long position.

The idea behind Materialise NV and Gelsenwasser 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.