Correlation Between H B and Covestro ADR

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

By analyzing existing cross correlation between H B Fuller and Covestro ADR, you can compare the effects of market volatilities on H B and Covestro ADR 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 H B with a short position of Covestro ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and Covestro ADR.

Diversification Opportunities for H B and Covestro ADR

-0.78

Correlation Coefficient

H B  Covestro ADR

Pay attention - limited upside

The 3 months correlation between FUL and Covestro is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Covestro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro ADR and H B 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 H B Fuller are associated (or correlated) with Covestro ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro ADR has no effect on the direction of H B i.e., H B and Covestro ADR go up and down completely randomly.

Pair Corralation between H B and Covestro ADR

Considering the 90-day investment horizon H B Fuller is expected to under-perform the Covestro ADR. In addition to that, H B is 2.6 times more volatile than Covestro ADR. It trades about -0.12 of its total potential returns per unit of risk. Covestro ADR is currently generating about 0.19 per unit of volatility. If you would invest  2,906  in Covestro ADR on December 28, 2024 and sell it today you would earn a total of  249.00  from holding Covestro ADR or generate 8.57% return on investment over 90 days.

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

H B Fuller  vs.  Covestro ADR

H B Fuller

Risk-Adjusted Performance

Very Weak

Over the last 90 days H B Fuller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Covestro ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Covestro ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Covestro ADR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with H B and Covestro ADR

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

The idea behind H B Fuller and Covestro ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.