Correlation Between New Germany and Central Europe

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

By analyzing existing cross correlation between New Germany Closed and Central Europe Russia, you can compare the effects of market volatilities on New Germany and Central Europe 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 New Germany with a short position of Central Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Germany and Central Europe.

Diversification Opportunities for New Germany and Central Europe

-0.72

Correlation Coefficient

New Germany  Central Europe

Pay attention - limited upside

The 3 months correlation between New and Central is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding New Germany Closed and Central Europe Russia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Europe Russia and New Germany 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 New Germany Closed are associated (or correlated) with Central Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Europe Russia has no effect on the direction of New Germany i.e., New Germany and Central Europe go up and down completely randomly.

Pair Corralation between New Germany and Central Europe

Allowing for the 90-day total investment horizon New Germany Closed is expected to generate 0.41 times more return on investment than Central Europe. However, New Germany Closed is 2.47 times less risky than Central Europe. It trades about -0.02 of its potential returns per unit of risk. Central Europe Russia is currently generating about -0.14 per unit of risk. If you would invest  838.00  in New Germany Closed on September 12, 2024 and sell it today you would lose (3.00) from holding New Germany Closed or give up 0.36% of portfolio value over 90 days.

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

New Germany Closed  vs.  Central Europe Russia

New Germany Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Germany Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, New Germany is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Central Europe Russia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather fragile technical and fundamental indicators, Central Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Germany and Central Europe

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

The idea behind New Germany Closed and Central Europe Russia 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.