Correlation Between Focus Home and Thyssenkrupp

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

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

Diversification Opportunities for Focus Home and Thyssenkrupp

-0.74

Correlation Coefficient

Focus Home  Thyssenkrupp

Pay attention - limited upside

The 3 months correlation between Focus and Thyssenkrupp is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and Focus Home 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 Focus Home Interactive are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Focus Home i.e., Focus Home and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Focus Home and Thyssenkrupp

Assuming the 90 days horizon Focus Home Interactive is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, Focus Home Interactive is 2.06 times less risky than Thyssenkrupp. The stock trades about -0.02 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  367.00  in thyssenkrupp AG on December 23, 2024 and sell it today you would earn a total of  583.00  from holding thyssenkrupp AG or generate 158.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Focus Home Interactive  vs.  thyssenkrupp AG

Focus Home Interactive

Risk-Adjusted Performance

Very Weak

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

thyssenkrupp AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Home and Thyssenkrupp

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

The idea behind Focus Home Interactive and thyssenkrupp 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.

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.