Correlation Between Emmi AG and Dorma Kaba

Can any of the company-specific risk be diversified away by investing in both Emmi AG and Dorma Kaba 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 Emmi AG and Dorma Kaba into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emmi AG and Dorma Kaba Holding, you can compare the effects of market volatilities on Emmi AG and Dorma Kaba 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 Emmi AG with a short position of Dorma Kaba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emmi AG and Dorma Kaba.

Diversification Opportunities for Emmi AG and Dorma Kaba

0.58

Correlation Coefficient

Emmi AG  Dorma Kaba

Very weak diversification

The 3 months correlation between Emmi and Dorma is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Emmi AG and Dorma Kaba Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorma Kaba Holding and Emmi AG 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 Emmi AG are associated (or correlated) with Dorma Kaba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorma Kaba Holding has no effect on the direction of Emmi AG i.e., Emmi AG and Dorma Kaba go up and down completely randomly.

Pair Corralation between Emmi AG and Dorma Kaba

Assuming the 90 days trading horizon Emmi AG is expected to generate 0.63 times more return on investment than Dorma Kaba. However, Emmi AG is 1.6 times less risky than Dorma Kaba. It trades about 0.14 of its potential returns per unit of risk. Dorma Kaba Holding is currently generating about 0.06 per unit of risk. If you would invest  73,900  in Emmi AG on December 27, 2024 and sell it today you would earn a total of  7,000  from holding Emmi AG or generate 9.47% return on investment over 90 days.

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

Emmi AG  vs.  Dorma Kaba Holding

Emmi AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emmi AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emmi AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dorma Kaba Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dorma Kaba Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dorma Kaba may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Emmi AG and Dorma Kaba

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

The idea behind Emmi AG and Dorma Kaba Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.