Correlation Between VERTIV HOLCL and Varta AG

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

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

Diversification Opportunities for VERTIV HOLCL and Varta AG

0.43

Correlation Coefficient

VERTIV HOLCL  Varta AG

Very weak diversification

The 3 months correlation between VERTIV and Varta is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding VERTIV HOLCL A and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and VERTIV HOLCL 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 VERTIV HOLCL A are associated (or correlated) with Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of VERTIV HOLCL i.e., VERTIV HOLCL and Varta AG go up and down completely randomly.

Pair Corralation between VERTIV HOLCL and Varta AG

Assuming the 90 days horizon VERTIV HOLCL A is expected to under-perform the Varta AG. But the stock apears to be less risky and, when comparing its historical volatility, VERTIV HOLCL A is 2.86 times less risky than Varta AG. The stock trades about -0.1 of its potential returns per unit of risk. The Varta AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Varta AG on December 29, 2024 and sell it today you would lose (29.00) from holding Varta AG or give up 19.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.25%
Values	Daily Returns

VERTIV HOLCL A  vs.  Varta AG

VERTIV HOLCL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days VERTIV HOLCL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Varta AG

Risk-Adjusted Performance

Insignificant

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Varta AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VERTIV HOLCL and Varta AG

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

The idea behind VERTIV HOLCL A and Varta 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.