Correlation Between Burckhardt Compression and Metall Zug

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

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

Diversification Opportunities for Burckhardt Compression and Metall Zug

-0.52

Correlation Coefficient

Burckhardt Compression  Metall Zug

Excellent diversification

The 3 months correlation between Burckhardt and Metall is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Burckhardt Compression and Metall Zug AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metall Zug 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 Metall Zug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metall Zug AG has no effect on the direction of Burckhardt Compression i.e., Burckhardt Compression and Metall Zug go up and down completely randomly.

Pair Corralation between Burckhardt Compression and Metall Zug

Assuming the 90 days trading horizon Burckhardt Compression is expected to generate 0.9 times more return on investment than Metall Zug. However, Burckhardt Compression is 1.11 times less risky than Metall Zug. It trades about -0.07 of its potential returns per unit of risk. Metall Zug AG is currently generating about -0.07 per unit of risk. If you would invest  66,800  in Burckhardt Compression on December 2, 2024 and sell it today you would lose (4,300) from holding Burckhardt Compression or give up 6.44% of portfolio value over 90 days.

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

Burckhardt Compression  vs.  Metall Zug 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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Metall Zug AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metall Zug AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Burckhardt Compression and Metall Zug

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

The idea behind Burckhardt Compression and Metall Zug 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.