Correlation Between Deutsche Lufthansa and TOMI Environmental

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

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

Diversification Opportunities for Deutsche Lufthansa and TOMI Environmental

-0.71

Correlation Coefficient

Deutsche Lufthansa  TOMI Environmental

Pay attention - limited upside

The 3 months correlation between Deutsche and TOMI is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Lufthansa AG and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI Environmental and Deutsche Lufthansa 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 Deutsche Lufthansa AG are associated (or correlated) with TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of Deutsche Lufthansa i.e., Deutsche Lufthansa and TOMI Environmental go up and down completely randomly.

Pair Corralation between Deutsche Lufthansa and TOMI Environmental

Assuming the 90 days horizon Deutsche Lufthansa AG is expected to generate 0.57 times more return on investment than TOMI Environmental. However, Deutsche Lufthansa AG is 1.74 times less risky than TOMI Environmental. It trades about 0.13 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about -0.04 per unit of risk. If you would invest  645.00  in Deutsche Lufthansa AG on December 28, 2024 and sell it today you would earn a total of  128.00  from holding Deutsche Lufthansa AG or generate 19.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Deutsche Lufthansa AG  vs.  TOMI Environmental Solutions

Deutsche Lufthansa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Lufthansa AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, Deutsche Lufthansa showed solid returns over the last few months and may actually be approaching a breakup point.

TOMI Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Deutsche Lufthansa and TOMI Environmental

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

The idea behind Deutsche Lufthansa AG and TOMI Environmental Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.