Correlation Between ABERFORTH SMCOS and Deutsche Wohnen

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

By analyzing existing cross correlation between ABERFORTH SMCOS TRLS 01 and Deutsche Wohnen SE, you can compare the effects of market volatilities on ABERFORTH SMCOS and Deutsche Wohnen 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 ABERFORTH SMCOS with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABERFORTH SMCOS and Deutsche Wohnen.

Diversification Opportunities for ABERFORTH SMCOS and Deutsche Wohnen

0.65

Correlation Coefficient

ABERFORTH SMCOS  Deutsche Wohnen

Poor diversification

The 3 months correlation between ABERFORTH and Deutsche is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ABERFORTH SMCOS TRLS 01 and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and ABERFORTH SMCOS 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 ABERFORTH SMCOS TRLS 01 are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of ABERFORTH SMCOS i.e., ABERFORTH SMCOS and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between ABERFORTH SMCOS and Deutsche Wohnen

Assuming the 90 days horizon ABERFORTH SMCOS is expected to generate 2.2 times less return on investment than Deutsche Wohnen. But when comparing it to its historical volatility, ABERFORTH SMCOS TRLS 01 is 2.98 times less risky than Deutsche Wohnen. It trades about 0.07 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,280  in Deutsche Wohnen SE on September 23, 2024 and sell it today you would earn a total of  50.00  from holding Deutsche Wohnen SE or generate 2.19% return on investment over 90 days.

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

ABERFORTH SMCOS TRLS 01  vs.  Deutsche Wohnen SE

ABERFORTH SMCOS TRLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABERFORTH SMCOS TRLS 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABERFORTH SMCOS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Wohnen SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Wohnen SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ABERFORTH SMCOS and Deutsche Wohnen

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

The idea behind ABERFORTH SMCOS TRLS 01 and Deutsche Wohnen SE 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.