Correlation Between SYSTEMAIR and Heidelberg Pharma

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

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

Diversification Opportunities for SYSTEMAIR and Heidelberg Pharma

-0.35

Correlation Coefficient

SYSTEMAIR  Heidelberg Pharma

Very good diversification

The 3 months correlation between SYSTEMAIR and Heidelberg is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB and Heidelberg Pharma AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Pharma and SYSTEMAIR 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 SYSTEMAIR AB are associated (or correlated) with Heidelberg Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Pharma has no effect on the direction of SYSTEMAIR i.e., SYSTEMAIR and Heidelberg Pharma go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Heidelberg Pharma

Assuming the 90 days trading horizon SYSTEMAIR AB is expected to under-perform the Heidelberg Pharma. But the stock apears to be less risky and, when comparing its historical volatility, SYSTEMAIR AB is 1.51 times less risky than Heidelberg Pharma. The stock trades about -0.05 of its potential returns per unit of risk. The Heidelberg Pharma AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Heidelberg Pharma AG on December 25, 2024 and sell it today you would earn a total of  40.00  from holding Heidelberg Pharma AG or generate 18.6% return on investment over 90 days.

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

SYSTEMAIR AB  vs.  Heidelberg Pharma AG

SYSTEMAIR AB

Risk-Adjusted Performance

Very Weak

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

Heidelberg Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Pharma AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Heidelberg Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SYSTEMAIR and Heidelberg Pharma

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

The idea behind SYSTEMAIR AB and Heidelberg Pharma 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.