Correlation Between FORTEC Elektronik and KAGA EL

Can any of the company-specific risk be diversified away by investing in both FORTEC Elektronik and KAGA EL 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 KAGA EL 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 KAGA EL LTD, you can compare the effects of market volatilities on FORTEC Elektronik and KAGA EL 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 KAGA EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORTEC Elektronik and KAGA EL.

Diversification Opportunities for FORTEC Elektronik and KAGA EL

0.35

Correlation Coefficient

FORTEC Elektronik  KAGA EL

Weak diversification

The 3 months correlation between FORTEC and KAGA is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FORTEC Elektronik AG and KAGA EL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAGA EL LTD 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 KAGA EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAGA EL LTD has no effect on the direction of FORTEC Elektronik i.e., FORTEC Elektronik and KAGA EL go up and down completely randomly.

Pair Corralation between FORTEC Elektronik and KAGA EL

Assuming the 90 days trading horizon FORTEC Elektronik AG is expected to under-perform the KAGA EL. In addition to that, FORTEC Elektronik is 1.02 times more volatile than KAGA EL LTD. It trades about -0.07 of its total potential returns per unit of risk. KAGA EL LTD is currently generating about 0.15 per unit of volatility. If you would invest  1,650  in KAGA EL LTD on September 23, 2024 and sell it today you would earn a total of  80.00  from holding KAGA EL LTD or generate 4.85% return on investment over 90 days.

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

FORTEC Elektronik AG  vs.  KAGA EL LTD

FORTEC Elektronik

Risk-Adjusted Performance

0 of 100

Very Weak

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

KAGA EL LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAGA EL LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAGA EL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FORTEC Elektronik and KAGA EL

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

The idea behind FORTEC Elektronik AG and KAGA EL LTD 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.