Correlation Between Continental Aktiengesellscha and Douglas Dynamics

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

By analyzing existing cross correlation between Continental Aktiengesellschaft and Douglas Dynamics, you can compare the effects of market volatilities on Continental Aktiengesellscha and Douglas Dynamics 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 Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and Douglas Dynamics.

Diversification Opportunities for Continental Aktiengesellscha and Douglas Dynamics

0.02

Correlation Coefficient

Continental Aktiengesellscha  Douglas Dynamics

Significant diversification

The 3 months correlation between Continental and Douglas is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics 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 Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Continental Aktiengesellscha i.e., Continental Aktiengesellscha and Douglas Dynamics go up and down completely randomly.

Pair Corralation between Continental Aktiengesellscha and Douglas Dynamics

Assuming the 90 days horizon Continental Aktiengesellschaft is expected to generate 2.1 times more return on investment than Douglas Dynamics. However, Continental Aktiengesellscha is 2.1 times more volatile than Douglas Dynamics. It trades about 0.08 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.02 per unit of risk. If you would invest  6,302  in Continental Aktiengesellschaft on October 22, 2024 and sell it today you would earn a total of  485.00  from holding Continental Aktiengesellschaft or generate 7.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Continental Aktiengesellschaft  vs.  Douglas Dynamics

Continental Aktiengesellscha

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Continental Aktiengesellscha may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Douglas Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Continental Aktiengesellscha and Douglas Dynamics

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

The idea behind Continental Aktiengesellschaft and Douglas Dynamics 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.