Correlation Between STRA Hannoversche and MaxLinear

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

By analyzing existing cross correlation between STRA Hannoversche Verkehrsbetriebe and MaxLinear, you can compare the effects of market volatilities on STRA Hannoversche and MaxLinear 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 STRA Hannoversche with a short position of MaxLinear. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRA Hannoversche and MaxLinear.

Diversification Opportunities for STRA Hannoversche and MaxLinear

-0.34

Correlation Coefficient

STRA Hannoversche  MaxLinear

Very good diversification

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

Pair Corralation between STRA Hannoversche and MaxLinear

Assuming the 90 days horizon STRA Hannoversche Verkehrsbetriebe is expected to under-perform the MaxLinear. But the stock apears to be less risky and, when comparing its historical volatility, STRA Hannoversche Verkehrsbetriebe is 4.24 times less risky than MaxLinear. The stock trades about -0.04 of its potential returns per unit of risk. The MaxLinear is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,374  in MaxLinear on October 8, 2024 and sell it today you would earn a total of  619.00  from holding MaxLinear or generate 45.05% return on investment over 90 days.

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

STRA Hannoversche Verkehrsbetr  vs.  MaxLinear

STRA Hannoversche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRA Hannoversche Verkehrsbetriebe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STRA Hannoversche is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MaxLinear

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MaxLinear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRA Hannoversche and MaxLinear

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

The idea behind STRA Hannoversche Verkehrsbetriebe and MaxLinear 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.