Correlation Between Continental Aktiengesellscha and DENSO P

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

By analyzing existing cross correlation between Continental Aktiengesellschaft and DENSO P ADR, you can compare the effects of market volatilities on Continental Aktiengesellscha and DENSO P 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 Continental Aktiengesellscha with a short position of DENSO P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and DENSO P.

Diversification Opportunities for Continental Aktiengesellscha and DENSO P

0.23

Correlation Coefficient

Continental Aktiengesellscha  DENSO P

Modest diversification

The 3 months correlation between Continental and DENSO is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR and Continental Aktiengesellscha 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 Continental Aktiengesellschaft are associated (or correlated) with DENSO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of Continental Aktiengesellscha i.e., Continental Aktiengesellscha and DENSO P go up and down completely randomly.

Pair Corralation between Continental Aktiengesellscha and DENSO P

Assuming the 90 days trading horizon Continental Aktiengesellscha is expected to generate 1.02 times less return on investment than DENSO P. But when comparing it to its historical volatility, Continental Aktiengesellschaft is 1.05 times less risky than DENSO P. It trades about 0.02 of its potential returns per unit of risk. DENSO P ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,073  in DENSO P ADR on September 23, 2024 and sell it today you would earn a total of  157.00  from holding DENSO P ADR or generate 14.63% return on investment over 90 days.

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

Continental Aktiengesellschaft  vs.  DENSO P ADR

Continental Aktiengesellscha

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Continental Aktiengesellscha unveiled solid returns over the last few months and may actually be approaching a breakup point.

DENSO P ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DENSO P ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DENSO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Continental Aktiengesellscha and DENSO P

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

The idea behind Continental Aktiengesellschaft and DENSO P ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.