Correlation Between GEAR4MUSIC and Varta AG

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC and Varta AG 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 GEAR4MUSIC and Varta AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Varta AG, you can compare the effects of market volatilities on GEAR4MUSIC and Varta AG 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 GEAR4MUSIC with a short position of Varta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and Varta AG.

Diversification Opportunities for GEAR4MUSIC and Varta AG

0.34

Correlation Coefficient

GEAR4MUSIC  Varta AG

Weak diversification

The 3 months correlation between GEAR4MUSIC and Varta is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG and GEAR4MUSIC 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 GEAR4MUSIC LS 10 are associated (or correlated) with Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of GEAR4MUSIC i.e., GEAR4MUSIC and Varta AG go up and down completely randomly.

Pair Corralation between GEAR4MUSIC and Varta AG

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 0.32 times more return on investment than Varta AG. However, GEAR4MUSIC LS 10 is 3.09 times less risky than Varta AG. It trades about -0.06 of its potential returns per unit of risk. Varta AG is currently generating about -0.23 per unit of risk. If you would invest  191.00  in GEAR4MUSIC LS 10 on October 26, 2024 and sell it today you would lose (23.00) from holding GEAR4MUSIC LS 10 or give up 12.04% of portfolio value over 90 days.

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

GEAR4MUSIC LS 10  vs.  Varta AG

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GEAR4MUSIC and Varta AG

The main advantage of trading using opposite GEAR4MUSIC and Varta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC position performs unexpectedly, Varta AG 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 Varta AG will offset losses from the drop in Varta AG's long position.

The idea behind GEAR4MUSIC LS 10 and Varta AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.