Correlation Between Fresenius Medical and MAHLE Metal

Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and MAHLE Metal 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 MAHLE Metal 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 MAHLE Metal Leve, you can compare the effects of market volatilities on Fresenius Medical and MAHLE Metal 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 MAHLE Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and MAHLE Metal.

Diversification Opportunities for Fresenius Medical and MAHLE Metal

0.74

Correlation Coefficient

Fresenius Medical  MAHLE Metal

Poor diversification

The 3 months correlation between Fresenius and MAHLE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and MAHLE Metal Leve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAHLE Metal Leve 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 MAHLE Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAHLE Metal Leve has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and MAHLE Metal go up and down completely randomly.

Pair Corralation between Fresenius Medical and MAHLE Metal

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.27 times more return on investment than MAHLE Metal. However, Fresenius Medical Care is 3.68 times less risky than MAHLE Metal. It trades about -0.13 of its potential returns per unit of risk. MAHLE Metal Leve is currently generating about -0.1 per unit of risk. If you would invest  11,322  in Fresenius Medical Care on October 9, 2024 and sell it today you would lose (377.00) from holding Fresenius Medical Care or give up 3.33% of portfolio value over 90 days.

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

Fresenius Medical Care  vs.  MAHLE Metal Leve

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fresenius Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fresenius Medical and MAHLE Metal

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

The idea behind Fresenius Medical Care and MAHLE Metal Leve 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.