Correlation Between KAGA EL and FORTEC Elektronik

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

By analyzing existing cross correlation between KAGA EL LTD and FORTEC Elektronik AG, you can compare the effects of market volatilities on KAGA EL and FORTEC Elektronik 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 KAGA EL with a short position of FORTEC Elektronik. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAGA EL and FORTEC Elektronik.

Diversification Opportunities for KAGA EL and FORTEC Elektronik

0.35

Correlation Coefficient

KAGA EL  FORTEC Elektronik

Weak diversification

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

Pair Corralation between KAGA EL and FORTEC Elektronik

Assuming the 90 days horizon KAGA EL LTD is expected to generate 0.98 times more return on investment than FORTEC Elektronik. However, KAGA EL LTD is 1.02 times less risky than FORTEC Elektronik. It trades about 0.15 of its potential returns per unit of risk. FORTEC Elektronik AG is currently generating about -0.07 per unit of risk. If you would invest  1,650  in KAGA EL LTD on September 23, 2024 and sell it today you would earn a total of  80.00  from holding KAGA EL LTD or generate 4.85% return on investment over 90 days.

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

KAGA EL LTD  vs.  FORTEC Elektronik AG

KAGA EL LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAGA EL LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAGA EL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

FORTEC Elektronik

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORTEC Elektronik AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FORTEC Elektronik is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KAGA EL and FORTEC Elektronik

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

The idea behind KAGA EL LTD and FORTEC Elektronik 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.