Correlation Between Deutsche Post and WuXi AppTec

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

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

Diversification Opportunities for Deutsche Post and WuXi AppTec

0.71

Correlation Coefficient

Deutsche Post  WuXi AppTec

Poor diversification

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

Pair Corralation between Deutsche Post and WuXi AppTec

Assuming the 90 days horizon Deutsche Post AG is expected to generate 1.04 times more return on investment than WuXi AppTec. However, Deutsche Post is 1.04 times more volatile than WuXi AppTec Co. It trades about 0.21 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about 0.08 per unit of risk. If you would invest  3,546  in Deutsche Post AG on December 20, 2024 and sell it today you would earn a total of  1,123  from holding Deutsche Post AG or generate 31.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Deutsche Post AG  vs.  WuXi AppTec Co

Deutsche Post AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Post AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Deutsche Post reported solid returns over the last few months and may actually be approaching a breakup point.

WuXi AppTec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WuXi AppTec Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward indicators, WuXi AppTec may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Deutsche Post and WuXi AppTec

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

The idea behind Deutsche Post AG and WuXi AppTec Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.