Correlation Between COFACE SA and HANNRUECKVSE ADR

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

By analyzing existing cross correlation between COFACE SA and HANNRUECKVSE ADR 12ON, you can compare the effects of market volatilities on COFACE SA and HANNRUECKVSE ADR 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 COFACE SA with a short position of HANNRUECKVSE ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of COFACE SA and HANNRUECKVSE ADR.

Diversification Opportunities for COFACE SA and HANNRUECKVSE ADR

0.05

Correlation Coefficient

COFACE SA  HANNRUECKVSE ADR

Significant diversification

The 3 months correlation between COFACE and HANNRUECKVSE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding COFACE SA and HANNRUECKVSE ADR 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANNRUECKVSE ADR 12ON and COFACE SA 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 COFACE SA are associated (or correlated) with HANNRUECKVSE ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANNRUECKVSE ADR 12ON has no effect on the direction of COFACE SA i.e., COFACE SA and HANNRUECKVSE ADR go up and down completely randomly.

Pair Corralation between COFACE SA and HANNRUECKVSE ADR

Assuming the 90 days horizon COFACE SA is expected to under-perform the HANNRUECKVSE ADR. But the stock apears to be less risky and, when comparing its historical volatility, COFACE SA is 1.09 times less risky than HANNRUECKVSE ADR. The stock trades about -0.3 of its potential returns per unit of risk. The HANNRUECKVSE ADR 12ON is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,080  in HANNRUECKVSE ADR 12ON on September 24, 2024 and sell it today you would lose (40.00) from holding HANNRUECKVSE ADR 12ON or give up 0.98% of portfolio value over 90 days.

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

COFACE SA  vs.  HANNRUECKVSE ADR 12ON

COFACE SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

HANNRUECKVSE ADR 12ON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HANNRUECKVSE ADR 12ON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HANNRUECKVSE ADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COFACE SA and HANNRUECKVSE ADR

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

The idea behind COFACE SA and HANNRUECKVSE ADR 12ON 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.