Correlation Between Data Modul and ABERFORTH SMCOS

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

By analyzing existing cross correlation between Data Modul AG and ABERFORTH SMCOS TRLS 01, you can compare the effects of market volatilities on Data Modul and ABERFORTH SMCOS 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 Data Modul with a short position of ABERFORTH SMCOS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Modul and ABERFORTH SMCOS.

Diversification Opportunities for Data Modul and ABERFORTH SMCOS

0.11

Correlation Coefficient

Data Modul  ABERFORTH SMCOS

Average diversification

The 3 months correlation between Data and ABERFORTH is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG and ABERFORTH SMCOS TRLS 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABERFORTH SMCOS TRLS and Data Modul 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 Data Modul AG are associated (or correlated) with ABERFORTH SMCOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABERFORTH SMCOS TRLS has no effect on the direction of Data Modul i.e., Data Modul and ABERFORTH SMCOS go up and down completely randomly.

Pair Corralation between Data Modul and ABERFORTH SMCOS

Assuming the 90 days trading horizon Data Modul AG is expected to generate 1.5 times more return on investment than ABERFORTH SMCOS. However, Data Modul is 1.5 times more volatile than ABERFORTH SMCOS TRLS 01. It trades about -0.01 of its potential returns per unit of risk. ABERFORTH SMCOS TRLS 01 is currently generating about -0.03 per unit of risk. If you would invest  2,700  in Data Modul AG on December 22, 2024 and sell it today you would lose (80.00) from holding Data Modul AG or give up 2.96% of portfolio value over 90 days.

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

Data Modul AG  vs.  ABERFORTH SMCOS TRLS 01

Data Modul AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Modul is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

ABERFORTH SMCOS TRLS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABERFORTH SMCOS TRLS 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABERFORTH SMCOS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Data Modul and ABERFORTH SMCOS

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

The idea behind Data Modul AG and ABERFORTH SMCOS TRLS 01 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.