Correlation Between BC IRON and Varta AG

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

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

Diversification Opportunities for BC IRON and Varta AG

0.05

Correlation Coefficient

BC IRON  Varta AG

Significant diversification

The 3 months correlation between BC3 and Varta is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and BC IRON 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 BC IRON 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 BC IRON i.e., BC IRON and Varta AG go up and down completely randomly.

Pair Corralation between BC IRON and Varta AG

Assuming the 90 days trading horizon BC IRON is expected to under-perform the Varta AG. But the stock apears to be less risky and, when comparing its historical volatility, BC IRON is 6.86 times less risky than Varta AG. The stock trades about -0.09 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  152.00  in Varta AG on December 21, 2024 and sell it today you would lose (30.00) from holding Varta AG or give up 19.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

BC IRON  vs.  Varta AG

BC IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 BC IRON and Varta AG

The main advantage of trading using opposite BC IRON and Varta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BC IRON 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 BC IRON 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..