Correlation Between CeoTronics and Thyssenkrupp

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

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

Diversification Opportunities for CeoTronics and Thyssenkrupp

0.69

Correlation Coefficient

CeoTronics  Thyssenkrupp

Poor diversification

The 3 months correlation between CeoTronics and Thyssenkrupp is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CeoTronics AG and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and CeoTronics 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 CeoTronics AG are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of CeoTronics i.e., CeoTronics and Thyssenkrupp go up and down completely randomly.

Pair Corralation between CeoTronics and Thyssenkrupp

Assuming the 90 days trading horizon CeoTronics AG is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, CeoTronics AG is 1.42 times less risky than Thyssenkrupp. The stock trades about -0.49 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  406.00  in thyssenkrupp AG on October 6, 2024 and sell it today you would lose (28.00) from holding thyssenkrupp AG or give up 6.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

CeoTronics AG  vs.  thyssenkrupp AG

CeoTronics AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, CeoTronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

thyssenkrupp AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CeoTronics and Thyssenkrupp

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

The idea behind CeoTronics AG and thyssenkrupp 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.