Correlation Between HAMMONIA Schiffsholding and Contact Energy

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

By analyzing existing cross correlation between HAMMONIA Schiffsholding AG and Contact Energy Limited, you can compare the effects of market volatilities on HAMMONIA Schiffsholding and Contact Energy 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 HAMMONIA Schiffsholding with a short position of Contact Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HAMMONIA Schiffsholding and Contact Energy.

Diversification Opportunities for HAMMONIA Schiffsholding and Contact Energy

-0.33

Correlation Coefficient

HAMMONIA Schiffsholding  Contact Energy

Very good diversification

The 3 months correlation between HAMMONIA and Contact is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding HAMMONIA Schiffsholding AG and Contact Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Energy and HAMMONIA Schiffsholding 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 HAMMONIA Schiffsholding AG are associated (or correlated) with Contact Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Energy has no effect on the direction of HAMMONIA Schiffsholding i.e., HAMMONIA Schiffsholding and Contact Energy go up and down completely randomly.

Pair Corralation between HAMMONIA Schiffsholding and Contact Energy

Assuming the 90 days trading horizon HAMMONIA Schiffsholding AG is expected to under-perform the Contact Energy. In addition to that, HAMMONIA Schiffsholding is 1.21 times more volatile than Contact Energy Limited. It trades about -0.04 of its total potential returns per unit of risk. Contact Energy Limited is currently generating about 0.04 per unit of volatility. If you would invest  434.00  in Contact Energy Limited on September 16, 2024 and sell it today you would earn a total of  18.00  from holding Contact Energy Limited or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

HAMMONIA Schiffsholding AG  vs.  Contact Energy Limited

HAMMONIA Schiffsholding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HAMMONIA Schiffsholding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HAMMONIA Schiffsholding is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Contact Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Contact Energy Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Contact Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HAMMONIA Schiffsholding and Contact Energy

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

The idea behind HAMMONIA Schiffsholding AG and Contact Energy Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.