Correlation Between Burckhardt Compression and Arbonia AG

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

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

Diversification Opportunities for Burckhardt Compression and Arbonia AG

0.32

Correlation Coefficient

Burckhardt Compression  Arbonia AG

Weak diversification

The 3 months correlation between Burckhardt and Arbonia is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Burckhardt Compression and Arbonia AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbonia AG and Burckhardt Compression 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 Burckhardt Compression are associated (or correlated) with Arbonia AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbonia AG has no effect on the direction of Burckhardt Compression i.e., Burckhardt Compression and Arbonia AG go up and down completely randomly.

Pair Corralation between Burckhardt Compression and Arbonia AG

Assuming the 90 days trading horizon Burckhardt Compression is expected to under-perform the Arbonia AG. But the stock apears to be less risky and, when comparing its historical volatility, Burckhardt Compression is 1.31 times less risky than Arbonia AG. The stock trades about -0.04 of its potential returns per unit of risk. The Arbonia AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,142  in Arbonia AG on November 28, 2024 and sell it today you would earn a total of  102.00  from holding Arbonia AG or generate 8.93% return on investment over 90 days.

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

Burckhardt Compression  vs.  Arbonia AG

Burckhardt Compression

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burckhardt Compression has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Burckhardt Compression is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arbonia AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arbonia AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbonia AG may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Burckhardt Compression and Arbonia AG

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

The idea behind Burckhardt Compression and Arbonia 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.