Correlation Between NEW MILLENNIUM and UMWELTBANK

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

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

Diversification Opportunities for NEW MILLENNIUM and UMWELTBANK

0.21

Correlation Coefficient

NEW MILLENNIUM  UMWELTBANK

Modest diversification

The 3 months correlation between NEW and UMWELTBANK is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and UMWELTBANK go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and UMWELTBANK

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to generate 4.7 times more return on investment than UMWELTBANK. However, NEW MILLENNIUM is 4.7 times more volatile than UMWELTBANK. It trades about 0.05 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.06 per unit of risk. If you would invest  184.00  in NEW MILLENNIUM IRON on October 11, 2024 and sell it today you would earn a total of  621.00  from holding NEW MILLENNIUM IRON or generate 337.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NEW MILLENNIUM IRON  vs.  UMWELTBANK

NEW MILLENNIUM IRON

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, NEW MILLENNIUM exhibited solid returns over the last few months and may actually be approaching a breakup point.

UMWELTBANK

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, UMWELTBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and UMWELTBANK

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

The idea behind NEW MILLENNIUM IRON and UMWELTBANK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.