Correlation Between FORTEC Elektronik and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both FORTEC Elektronik and AIR PRODCHEMICALS 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 FORTEC Elektronik and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for FORTEC Elektronik and AIR PRODCHEMICALS

-0.3

Correlation Coefficient

FORTEC Elektronik  AIR PRODCHEMICALS

Very good diversification

The 3 months correlation between FORTEC and AIR is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding FORTEC Elektronik AG and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and FORTEC Elektronik 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 FORTEC Elektronik AG are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of FORTEC Elektronik i.e., FORTEC Elektronik and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between FORTEC Elektronik and AIR PRODCHEMICALS

Assuming the 90 days horizon FORTEC Elektronik AG is expected to generate 3.4 times more return on investment than AIR PRODCHEMICALS. However, FORTEC Elektronik is 3.4 times more volatile than AIR PRODCHEMICALS. It trades about -0.02 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about -1.01 per unit of risk. If you would invest  1,950  in FORTEC Elektronik AG on October 10, 2024 and sell it today you would lose (20.00) from holding FORTEC Elektronik AG or give up 1.03% of portfolio value over 90 days.

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

FORTEC Elektronik AG  vs.  AIR PRODCHEMICALS

FORTEC Elektronik

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FORTEC Elektronik AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FORTEC Elektronik is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FORTEC Elektronik and AIR PRODCHEMICALS

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

The idea behind FORTEC Elektronik AG and AIR PRODCHEMICALS 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.