Correlation Between EMS CHEMIE and Belimo Holding

Can any of the company-specific risk be diversified away by investing in both EMS CHEMIE and Belimo Holding 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 EMS CHEMIE and Belimo Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for EMS CHEMIE and Belimo Holding

-0.51

Correlation Coefficient

EMS CHEMIE  Belimo Holding

Excellent diversification

The 3 months correlation between EMS and Belimo is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding EMS CHEMIE HOLDING AG and Belimo Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belimo Holding and EMS CHEMIE 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 EMS CHEMIE HOLDING AG are associated (or correlated) with Belimo Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belimo Holding has no effect on the direction of EMS CHEMIE i.e., EMS CHEMIE and Belimo Holding go up and down completely randomly.

Pair Corralation between EMS CHEMIE and Belimo Holding

Assuming the 90 days trading horizon EMS CHEMIE is expected to generate 2.03 times less return on investment than Belimo Holding. But when comparing it to its historical volatility, EMS CHEMIE HOLDING AG is 1.58 times less risky than Belimo Holding. It trades about 0.38 of its potential returns per unit of risk. Belimo Holding is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  59,800  in Belimo Holding on October 23, 2024 and sell it today you would earn a total of  5,900  from holding Belimo Holding or generate 9.87% return on investment over 90 days.

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

EMS CHEMIE HOLDING AG  vs.  Belimo Holding

EMS CHEMIE HOLDING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMS CHEMIE HOLDING AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Belimo Holding

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Belimo Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Belimo Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMS CHEMIE and Belimo Holding

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

The idea behind EMS CHEMIE HOLDING AG and Belimo 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.