Correlation Between Fresenius Medical and Veltex

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

By analyzing existing cross correlation between Fresenius Medical Care and Veltex, you can compare the effects of market volatilities on Fresenius Medical and Veltex 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 Fresenius Medical with a short position of Veltex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Veltex.

Diversification Opportunities for Fresenius Medical and Veltex

-0.46

Correlation Coefficient

Fresenius Medical  Veltex

Very good diversification

The 3 months correlation between Fresenius and Veltex is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Veltex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veltex and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with Veltex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veltex has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Veltex go up and down completely randomly.

Pair Corralation between Fresenius Medical and Veltex

Considering the 90-day investment horizon Fresenius Medical is expected to generate 6.28 times less return on investment than Veltex. But when comparing it to its historical volatility, Fresenius Medical Care is 3.82 times less risky than Veltex. It trades about 0.09 of its potential returns per unit of risk. Veltex is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7.16  in Veltex on September 23, 2024 and sell it today you would earn a total of  1.21  from holding Veltex or generate 16.9% return on investment over 90 days.

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

Fresenius Medical Care  vs.  Veltex

Fresenius Medical Care

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Fresenius Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Veltex

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veltex are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Veltex exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresenius Medical and Veltex

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

The idea behind Fresenius Medical Care and Veltex 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.