Correlation Between Commerzbank and Infineon Technologies

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

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

Diversification Opportunities for Commerzbank and Infineon Technologies

0.11

Correlation Coefficient

Commerzbank  Infineon Technologies

Average diversification

The 3 months correlation between Commerzbank and Infineon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies and Commerzbank 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 Commerzbank AG are associated (or correlated) with Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of Commerzbank i.e., Commerzbank and Infineon Technologies go up and down completely randomly.

Pair Corralation between Commerzbank and Infineon Technologies

Assuming the 90 days trading horizon Commerzbank AG is expected to generate 1.1 times more return on investment than Infineon Technologies. However, Commerzbank is 1.1 times more volatile than Infineon Technologies AG. It trades about 0.12 of its potential returns per unit of risk. Infineon Technologies AG is currently generating about 0.02 per unit of risk. If you would invest  503,200  in Commerzbank AG on August 30, 2024 and sell it today you would earn a total of  74,400  from holding Commerzbank AG or generate 14.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.42%
Values	Daily Returns

Commerzbank AG  vs.  Infineon Technologies AG

Commerzbank AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Commerzbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Infineon Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infineon Technologies AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Infineon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commerzbank and Infineon Technologies

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

The idea behind Commerzbank AG and Infineon Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.